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How are the ways to calculate FIFO, LIFO, and Average in different problems?

How are the ways to calculate FIFO, LIFO, and Average in different problems?

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Expert Solution

Calculation of Closing stock Units
Opening Stock
Add: Purchases
Less: Sold Units
Balance: Closing Stock Units
FIFO:
It assumes that, FIRST IN FIRST OUT. That Means the Closing stock will be from last purchases. Opening stock will be used first then purchases sequiencially.
Therefore here, closing stock units will be valued at the rate of recent purchases with respect to units of purchases.
LIFO:
It assumes that, LAST IN FIRST OUT. That Means the Closing stock will be from Opening Stock Units and Earlier Purchases. Recent Purchased units will be used first then from earlier purchases.
Therefore here, closing stock units will be valued at the rate of Opening Stock value and earlier purchases with respect to units of purchases.
Average:
It assumes that, units sold from all the available stock simultaneously. That Means the Closing stock can be from opening stock as well as all the purhcases made during the year.
Therefore here, closing stock units will be valued at the average rate of opening stock value and purchase price of the period.

ekkarill92 answered 1 year ago
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