The following information relates to item Q002 stocked by Mutaka products Ltd for the month of April 2004: Receipts Issues Date Units Units Unit cost (Sh) April3 2,,,,,,,,,900 The closing balance for March 2004 was a batch of 2,900 units received at a unit price of Sh 21. Required: Stores perpetual inventory record for item Q002 for April 2004 under LIFO and FIFO systems of stores issues.
The management of Mutaka Products Ltd. requires accurate and efficient inventory management systems to monitor stock levels, especially for fast-moving items such as Q002. During April 2004, understanding how inventory valuation methods like FIFO (First-In, First-Out) and LIFO (Last-In, First-Out) influence inventory records is crucial for financial reporting and cost control. This paper develops a detailed perpetual inventory record for item Q002 for April 2004 using both FIFO and LIFO methods, based on the provided data.
Initially, the inventory at the end of March 2004 consisted of 2,900 units valued at Sh 21 per unit, representing the closing balance. On April 3rd, 900 units were received, but we lack the unit cost in the raw data presented. Given standard inventory practices, it is reasonable to assume that the unit cost of these new units is also Sh 21 unless specified otherwise, as the given initial stock details suggest consistent pricing.
**Assumption:** The unit cost of the new stock received on April 3rd is Sh 21 per unit.
Using the FIFO method, inventory is valued based on the earliest stock available. As the initial stock and purchase prices are consistent, the calculations proceed as follows:
Initial stock (March 31, 2004):
2,900 units @ Sh 21 = Sh 60,900
April 3, 2004 - Receipt of 900 units:
900 units @ Sh 21 = Sh 18,900
The perpetual record follows the sequence of issues:
Suppose units are issued on April 3rd; the earliest stock (all at Sh 21) is used first. For simplicity, if a certain issue quantity is specified, the record would accordingly deduct units from the earliest stock and calculate the remaining. Since the specific issue quantities are not provided in the data, assumptions are made for illustration.
Assuming, for example, 1,000 units are issued during April:
Quantity issued: 1,000 units
FIFO method would reduce the earliest stock first:
First, 900 units from initial stock (all at Sh 21): 900 units at Sh 21
Remaining 100 units issued from the next batch received on April 3, but there is an issue here: unavailability of detailed issue data calls for assumptions or further info. For illustration, if no units are specified for issue, the inventory keeping under FIFO would keep track of stock entries and issue accordingly.
Inventory Summary under FIFO:
Beginning inventory (March 31): 2,900 units @ Sh 21 = Sh 60,900
April 3 Receipt: 900 units @ Sh 21 = Sh 18,900
Total units available: 3,800 units
Total value: Sh 79,800
Inventory Record for April under FIFO (Sample):
Date
Receipts/Issues
Units in Inventory
Unit Cost (Sh)
Total Cost (Sh)
March 31
Closing Balance
2,900 21
60,900
April 3
Receipt
900 21 18,900
Issues (assuming 1,000 units issued on April 3):
Date
Units Issued From
Remaining Inventory Valuation
April 3
1,000
FIFO: 900 units from initial stock + 100 units from new stock
1,800 units @ Sh 21
Sh 37,800
### LIFO Inventory Record for April 2004
Conversely, under LIFO, the latest stock (received on April 3) is issued first. The initial stock remains in inventory until all recent stock is exhausted. For example:
Assuming the same 1,000 units issued on April 3:
Issue first 900 units from the April 3 batch: 900 units @ Sh 21
Remaining 100 units issued from the initial stock of 2,900 units @ Sh 21, which remains unaffected in terms of the cost basis.
Inventory Summary under LIFO:
Beginning inventory (March 31): 2,900 units @ Sh 21
April 3 Receipt: 900 units @ Sh 21
Total units available: 3,800 units
Total value: Sh 79,800
Sample Record for April under LIFO:
Date
Receipts/Issues
Units in Inventory Unit Cost (Sh) Total Cost (Sh) March 31
18,900
Issues (assuming 1,000 units issued on April 3):
Date
Units Issued
From
Remaining Inventory
Valuation
April 3
1,000
Latest batch first: 900 units @ Sh 21 + 100 units from initial stock @ Sh 21
1,800 units remaining @ Sh 21
Sh 37,800
### Conclusion
Both FIFO and LIFO methods assume the same initial stock and purchase prices, which simplifies the calculations. Under FIFO, units issued are accounted for from the oldest stock, while under LIFO, units issued are from the newest stock first. The choice between these methods impacts cost of goods sold and ending inventory valuation—FILO typically results in lower COGS and higher ending inventory during times of rising prices, and vice versa for LIFO.
For accurate perpetual inventory management, detailed record-keeping that captures each transaction's date, units, and costs is essential. The illustrative records provided offer a framework but should be adjusted with actual issue quantities and costs when available.
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