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Female Narrator: Well, welcome back.
Now, we're going to do
all of the inventory methods over again,
but this time, we are going to be doing periodic.
So when we do periodic,
whether we're doing FIFO, LIFO, or average,
we have one step that we have to do
for all of them for periodic.
So when we do periodic...
regardless of the cost flow assumption,
first, we always calculate goods available for sale.
Always, always, always.
So goods available for sale
is how many units do I have available to sell?
So remember, we purchased
10 units at 5, 12 at 6, and 15 at 7.
So I purchased a total of 37 units.
These units cost me $50, $72, 105,
so I purchased a total value of 227.
Because this is periodic,
I'm not keeping track of this throughout the month.
I'm getting to the end of the month--
or the reporting period--
and I'm saying, okay, what's my cost of goods sold?
So we haven't been keeping track.
We just keep dumping everything in purchases.
The second thing that you need to do
is you need to calculate how many you've sold.
So how many units did I sell?
Well, I sold 8, then I sold 6, then I sold 9,
so I sold a total of 23.
Now that you have the facts,
you can start doing the cost flow assumption,
so let's do FIFO first.
There are three different calculations
you can do in the...
and you can do them in different orders.
It just depends on what works for you.
I like to calculate cost of goods sold first.
I find it easier, but like I said,
it depends on what you wanna do.
So I know I sold 23, and I'm doing FIFO.
So first in, first out, so I have to go down.
So I sold 10 at 5, 12 at 6, 'cause remember,
I have to get to a total of 23 units.
So to get to 23, I must've taken some from here.
So I have 23...
and this is for a total of $129.
So I sold 23 units for a total cost of goods sold of 129.
Then, you can do your ending inventory calculation.
Ending inventory.
If I sold 23...so let's see if I can figure this out.
I had 37 available for sale.
I sold 23,
so my ending inventory has to be 14 units.
So ending inventory, 14 times 7 equals $98.
Now as you guys know,
everything in accounting has its checks and balances,
so I wanna check my work.
So that's the third calculation.
I'm gonna take my goods available for sale of $37...
or 37 units for a total of 227.
I'm going to subtract out
my ending inventory of 14 units at $98.
And I should come up
with my cost of goods sold of 23 units at 129.
This is how you check your work.
Now, you could make the argument
that you could do one of these other calculations first.
It doesn't matter which order you do them in.
It's just in a habit to get in to do them all.
So this is the cost of goods sold calculation,
the ending inventory, and the check--
or you could use the check for the cost of goods sold,
and vice versa.
Okay?
Be watching for more videos.