Ac503quizinvty - Lecture notes 9 PDF

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QUIZ ON INVENTORIES (CHAPTER 10, 11 and 13)PROB. 1– CORRECT BALANCE OF INVENTORYThe inventory on hand on December 31, 2012 for Faith Company is valued at a cost of P 950,000. The following items were not included in this inventory amount: Item 1: Purchased goods in transit, shipped FOB destination, ...

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QUIZ ON INVENTORIES (CHAPTER 10, 11 and 13) PROB. 1– CORRECT BALANCE OF INVENTORY The inventory on hand on December 31, 2012 for Faith Company is valued at a cost of P 950,000. The following items were not included in this inventory amount: Item 1: Purchased goods in transit, shipped FOB destination, invoice price P 30,000 which includes freight charge of P 1,500 Item 2: Goods held on consignment by Faith Company at a sales price of P 28,000, including sales commission of 20% of the sales price. Item 3: Goods sold to a customer, under terms FOB destination, invoiced for P 18,500 which includes P 1,000 freight charge to deliver the goods. Goods are in transit. The entity’s selling price is 140% above cost Item 4: Purchased goods in transit, terms FOB shipping point, invoice price P50,000, freight cost, P 2,500. Item 5: Goods out on consignment to a consignee, sales price P35,000, shipping cost of P2,000. Required: Compute the correct amount of inventoy on December 31, 2012.. Prob. 1 Inventory per books Item 3 (18,500-1,000 / 140%) Item 4 (50,000 + 2,500) Item 5 (35,000 / 140% = 25,000 + 2,000) Adjusted inventory

950,000 12,500 52,500 27,000 1,042,000

PROB. 2 – TRADE AND CASH DISCOUNTS On June 1, 2012, Elaine Company sold merchandise with a list price of P 1,000,000 to a customer. Elaine Company allowed trade discounts of 20% and 10%. Credit terms were 5/10, n/30 and the sale was made FOB shipping point. Elaine Company prepaid P 50,000 as delivery cost for the customer as an accommodation. On June 11, 2012, what amount is received by Elaine Company from the customer as full remittance? Prob. 2 List price Trade discount (20% x 1,000,000) 2nd Trade discount (10% x 800,000) Invoice price Cash discount (5% x 720,000) Net amount Freight charge Total remittance

1,000,000 (200,000) 800,000 (80,000) 720,000 (36,000) 684,000 50,000 734,000

PROB. 3 – PERIODIC FIFO – COST OF INVENTORY Hilltop Company sells a new product. During a move to a new location, the inventory records for the product were misplaced. The bookkeeper has been able to gather some information from the purchases and sales records. The July purchases are as follows: Quantity Unit Cost Total Cost July 5 10,000 65 650,000 9 12,000 63 756,000 12 15,000 60 900,000 25 14,000 62 868,000 51,000 3,174,000 On July 31, 15,000 units were on hand. The sales for July amount to P 6,000,000, or 60,000 units at P 100 per unit. Hilltop Company has always used a periodic FIFO inventory costing system. Gross profit on sales for July was P 2,400,000. Required: Compute the cost of inventory on July 1

Prob. 3 Sales Gross profit Cost of goods sold Inventory – July 31 (see below) Goods available for sale Purchases Inventory – July 1

6,000,000 (2,400,000) 3,600,000 928,000 4,528,000 (3,174,000) 1,354,000

PROB. 4 – MOVING AVERAGE METHOD The following data were extracted from the records of Jailbird Company about its inventory for the month of January of the current year. Unit Unit Cost Total Cost Jan 1 Beginning 16,000 140 2,240,000 5 Purchase 4,000 150 600,000 10 Sale 15,000 15 Purchase 20,000 160 3,200,000 16 Purchase return 1,000 160 160,000 25 Sale 8,000 26 Sale return 4,000 31 Purchase 30,000 150 4,500,000 What is the moving average cost of the inventory on January 31? a) 7,625,000 b) 7,500,000 c) 7,690,000 Prob. 4 Inventory, in units, Jan. 31 x moving ave unit cost Moving ave cost of invty, Jan. 31

d) 7,530,000

50,000 152.50 P 7,625,000 (a)

PROB. 5 – NET REALIZABLE VALUE Matrimony Company has determined its December 31,2012 inventory on a FIFO basis to be P 4,000,000. Information pertaining to the inventory follows: Estimated selling price 4,050,000 Estimated cost of disposal 200,000 Normal profit margin 500,000 Current replacement cost 3,500,000 The entity records losses that result from applying the lower of cost or net realizable value. On December 31, 2012, what is the carrying amount of the inventory? a) 4,000,000 b) 3,850,000 c) 3,350,000 d) 3,500,000 Prob. 5 Estimated selling price Cost of disposal Net realizable value (lower than cost)

4,050,000 (200,000) 3,850,000 (b)

PROB. 6 – PURCHASE COMMITMENT On Nov. 15, 2012, Diamond Company entered into a commitment to purchase 10,000 ounces of gold on Feb. 15, 2013 at a price of P 310 per ounce. On Dec. 31, 2012, the market price of gold is P 270 per ounce. On Feb. 15, 2013, the price of gold is P 300 per ounce. What is the gain on purchase commitment that should be recognized on Feb. 15, 2013? 10,000 ounces x (300 – 270)

P 300,000 (gain on purchase commitment)

PROB. 7 – GROSS PROFIT METHOD – Invty Valuation The following information is provided by Era Company for the current year: Inventory, January 1 500,000 Purchases 2,000,000 Freight in 100,000 Purchase return and allowance 120,000 Purchase discount 80,000 Sales 2,200,000 Sales return 100,000 Sales allowance 50,000 Sales discount 50,000 Gross profit rate on cost 25% Under the gross profit method, what is the estimated cost of the inventory on December 31? a) 720,000 b) 825,000 c) 800,0000 d) 900,000 Prob. 7 Inventory, Jan. 1 Net Purchases: Purchases Freight-in Purch returns, allow. Purchase discount Goods available for sale Less Cost of sales: Sales Sales returns Net sales

500,000 2,000,000 100,000 (120,000) ( 80,000)

1,900,000 2,400,000

2,200,000 (100,000) 2,100,000

COS = 2,100 / 125% Inventory, Dec. 31

1,680,000 720,000 (a)

PROB. 8 - RETAIL METHOD (CONSERVATIVE COST and AVERAGE COST) Headstrong Company provided the following data: Cost Retail Beginning inventory 168,000 400,000 Purchases 2,806,000 3,100,000 Freight-in 42,000 Markup 300,000 Markup cancellation 30,000 Markdown 150,000 Markdown cancellation 40,000 Sales 3,000,000 Physical inventory at yearend 500,000 Estimated normal shrinkage is 4% of sales Required: Compute the ending inventory applying the conservative retail and determine any inventory shortage. Prob. 8 Beginning inventory Purchases Freight-in Markup

Cost 168,000 2,806,000 42,000

Retail 400,000 3,100,000 300,000

Markup cancellation Goods avail for sale-conservative

3,016,000

(30,000) 3,770,000

3,016,000

(150,000) 40,000 3,660,000

Cost ratio (3,016/3,770) = 80% Markdown Markdown cancellation Goods avail for sale-average Less Sales Shrinkage (4% x 3,000,000) Ending inventory Conservative cost (540,000 x 80%) Physical inventory (500,000 x 80%) Shortage

3,000,000 120,000

432,000 400,000 32,000

3,120,000 540,000...