Inventory Valuation Assignment: FIFO & Moving Average
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Queens College of Business. Individual Assignment for fundamental accounting II (20%). 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 ($). Mar 1 Opening Stock 200 15.00. Mar 5 Purchase 150 16.00. Mar 10 Sale 180. Mar 15 Purchase 100 17.00. Mar 20 Sale 120. Mar 25 Purchase 80 18.00. Mar 28 Sale 90. Required: use Perpetual and periodic Inventory costing and give short answer for the following question. Using the FIFO method, prepare: Inventory ledger (showing receipts, issues, and balance); Cost of Goods Sold (COGS) for March; Closing inventory value as of March 31. 2. Using the Moving Average method, prepare: Inventory ledger with recalculated average cost after each purchase; COGS for March; Closing inventory value as of March 31. 3. Compare the results from both methods and briefly explain: Which method gives a higher closing inventory value in this case? Why the COGS differs between the two methods.
This question includes visual content: The document contains a table listing transaction data for 'Amazon Traders' in March 2026. The table has three columns: 'Date Transaction', 'Units', and 'Unit Cost ($)'. Rows include: March 1 Opening Stock (200 units @ $15.00), March 5 Purchase (150 units @ $16.00), March 10 Sale (180 units), March 15 Purchase (100 units @ $17.00), March 20 Sale (120 units), March 25 Purchase (80 units @ $18.00), and March 28 Sale (90 units).
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In this exercise for Amazon Traders, we will analyze inventory valuation for March 2026 using two common methods: First In First Out, known as FIFO, and the Moving Average method. We will focus on the perpetual inventory system.
Inventory Valuation: FIFO vs Moving Average
Let's begin with the FIFO Perpetual Inventory Ledger. In FIFO, the earliest goods purchased are assumed to be the first ones sold. Here is our data summarized.
1. FIFO Inventory Ledger
| Date | Purchases | Issues (COGS) | Balance |
|---|---|---|---|
| Mar 1 | 200 @ $15.00 = $3,000 | ||
| Mar 5 | 150 @ $16.00 = $2,400 | (200@15), (150@16) | |
| Mar 10 | 180 @ $15.00 = $2,700 | (20@15), (150@16) | |
| Mar 15 | 100 @ $17.00 = $1,700 | (20@15), (150@16), (100@17) | |
| Mar 20 | (20@15)+(100@16) = $1,900 | (50@16), (100@17) | |
| Mar 25 | 80 @ $18.00 = $1,440 | (50@16), (100@17), (80@18) | |
| Mar 28 | (50@16)+(40@17) = $1,480 | (60@17), (80@18) |
Now, let's calculate the total Cost of Goods Sold and the Ending Inventory value for FIFO.
The ending inventory consists of sixty units at seventeen dollars and eighty units at eighteen dollars.
Next, let's look at the Moving Average Method. Unlike FIFO, this method recalculates a new weighted average cost per unit after every purchase.
2. Moving Average Inventory Ledger
| Date | Transaction | Units | Unit Cost | Total Value |
|---|---|---|---|---|
| Mar 1 | Opening | 200 | $15.00 | $3,000 |
| Mar 5 | Purchase | 150 | $16.00 | $2,400 |
| Mar 5 | New Balance | 350 | $15.43 | $5,400 |
| Mar 10 | Sale (180) | 170 | $15.43 | $2,623 |
| Mar 15 | Purchase | 100 | $17.00 | $1,700 |
| Mar 15 | New Balance | 270 | $16.01 | $4,323 |
| Mar 20 | Sale (120) | 150 | $16.01 | $2,402 |
| Mar 25 | Purchase | 80 | $18.00 | $1,440 |
| Mar 25 | New Balance | 230 | $16.70 | $3,842 |
| Mar 28 | Sale (90) | 140 | $16.70 | $2,338 |
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