Page 48 - Accountancy_F5

Additional information
(i) Inventory in hand at 31 December 2023 was 140 units.
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(ii) Total sales for the year were TZS 9,000,000.
Required: Calculate the value of closing inventory and cost of sales using
FIFO, LIFO and WAM under the periodic inventory system.
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Solution 2.1
(a) FIFO method under the periodic inventory-taking system:
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Under this method, the closing inventory, which consists of 140 units, is composed
of the most recent units to enter the store (recent purchases). Specifically, 100 units
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are from the purchases made on 10 November and the remaining 40 units are
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from the purchases made on 28 August 2023. Therefore, the value of the closing
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inventory of 140 units will be calculated as follows:

Month Units Unit costs Total costs
TZS TZS
August 40 6,600 264,000

November 100 6,800 680,000

140 944,000

The cost of goods sold will be calculated as follows:

TZS

Total purchases 8,320,000
Less: Closing inventory (944,000)

Cost of sales 7,376,000

(b) LIFO method under the periodic inventory stock taking system
Under the LIFO method, the closing inventory, which consists of 140 units, is
composed of the oldest units. Specifically, 20 units are from the purchases made
on 5 January, 2023 and the remaining 120 units are from the purchases made on
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28 March 2023.
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Student’s Book Form Five
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