Inventory Valuation Assignment: FIFO and Moving Average Method
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Queens College of Business
Individual Assignment for fundamental accounting II (20%)
Sure! Here's an original assignment question you can use for FIFO and Moving Average Method topics in inventory valuation.
Assignment Question: Inventory Valuation – FIFO & Moving Average Method
Scenario in Perpetual and FIFO & Moving Average Method in Periodic system
A company, Amazon Traders, deals in electronic gadgets. The following purchases and sales were made during the month of March 2026:
Date Transaction Units Unit Cost ($)
Mar 1 Opening Stock 200 15.00
Mar 5 Purchase 150 16.00
Mar 10 Sale 180
Mar 15 Purchase 100 17.00
Mar 20 Sale 120
Mar 25 Purchase 80 18.00
Mar 28 Sale 90
Required: use Perpetual and periodic Inventory costing and give short answer for the following question
Using the FIFO method, prepare:
• Inventory ledger (showing receipts, issues, and balance)
• Cost of Goods Sold (COGS) for March
• Closing inventory value as of March 31
2. Using the Moving Average method, prepare:
• Inventory ledger with recalculated average cost after each purchase
• COGS for March
• Closing inventory value as of March 31
3. Compare the results from both methods and briefly explain:
• Which method gives a higher closing inventory value in this case?
• Why the COGS differs between the two methods.
This question includes visual content: A table detailing inventory transactions for Amazon Traders in March 2026. The table contains three columns: 'Date Transaction', 'Units', and 'Unit Cost ($)'. It lists opening stock (200 units at $15.00), various purchases (150 units at $16.00, 100 units at $17.00, 80 units at $18.00), and sales dates (Mar 10, 20, 28) with the number of units sold.
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Hi Agemuas, let's dive into this inventory valuation assignment for Amazon Traders. We'll compare the First-In, First-Out method and the Moving Average method under a perpetual system.
Inventory Valuation: FIFO vs. Moving Average
First, let's look at the data. We start with 200 units on March 1st and have several purchases and sales throughout the month. Notice that the unit cost is steadily increasing from 15 to 18 dollars.
| Date | Transaction | Units | Cost |
|---|---|---|---|
| Mar 1 | Opening | 200 | $15 |
| Mar 5 | Purchase | 150 | $16 |
| Mar 15 | Purchase | 100 | $17 |
| Mar 25 | Purchase | 80 | $18 |
Let's start with the FIFO perpetual inventory ledger. Under FIFO, we always sell the oldest stock first.
1. FIFO Perpetual Inventory Ledger
| Date | Purchases | Cost of Goods Sold | Balance |
|---|---|---|---|
| Mar 1 | 200 @ $15 = $3000 | ||
| Mar 5 | 150 @ $16 = $2400 | (200@15) + (150@16) = $5400 |
On March 10th, we sell 180 units. Since we use FIFO, these come entirely from our oldest batch costing 15 dollars each.
| Date | Purchases | COGS | Balance |
|---|---|---|---|
| Mar 10 | 180 @ $15 = $2700 | (20@15) + (150@16) = $2700 |
On March 15th, we buy 100 more units at 17 dollars. Then, on March 20th, we sell 120 units. We take the remaining 20 units at 15 dollars first, then 100 units from the 16 dollar batch.
| Date | Purchases | COGS | Balance |
|---|---|---|---|
| Mar 15 | 100 @ $17 = $1700 | (20@15) + (150@16) + (100@17) | |
| Mar 20 | (20@15) + (100@16) = $1900 | (50@16) + (100@17) = $2500 |
Finally, we purchase 80 units at 18 dollars and sell 90 units. Those 90 units come from the rest of the 16 dollar batch and some of the 17 dollar batch.
| Date | Purchases | COGS | Balance |
|---|---|---|---|
| Mar 25 | 80 @ $18 = $1440 | (50@16) + (100@17) + (80@18) | |
| Mar 28 | (50@16) + (40@17) = $1480 | (60@17) + (80@18) = $2460 |
Summing up our FIFO results: total cost of goods sold is 6,080 dollars, and the closing inventory value is 2,460 dollars.
FIFO Summary
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