Purchase return in Weighted Average & FIFO Inventory Methods

[former_member871987]

Hello to all,

Have a question regarding Weighted Average Cost and FIFO when returning purchases to vendor

1- Weighted Average Cost

we have following purchase:

10 unit @ $20 & 5 unit @ $15 so average cost per unit is $ 18.33 = (10*20)+(5*15)/15

after that we sold 5 units, remaining 10 units @ $18.33

then we return our first purchase (10 unit @ $20), the journal entry is:

DR. Accounts Payable $ 183.3

CR. Inventory $ 183.3

in this case the vendor balance will not zero out, and if the journal entry is:

DR. Accounts Payable $ 200

CR. Inventory $ 183.3

the two sides are not balances, so how Dynamics treats this? please answer with journal entries.

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2- FIFO

we have following purchase:

3 unit @ $2000 & 3 unit @ $1500 & 1 @ $ 1750

After a few sales and purchases the stock will be like that:

6 unit @ $2700 & 3 unit @ $3500 & 2 @ $ 1000

then we had to return first purchase (3 units @ 2000), but now we don't have any batch @ $2000, according to FIFO rule, the journal entry will be:

DR. Accounts Payable $ 8100

CR. Inventory $ 8100 ---> (3*2700)

but our purchase was of $ 2000, so the vendor balance will not zero out.

so how Dynamics treats this?

Thanks.