Actg inventory 4 to understand the meaning of inventory PDF

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Inventories are asset held for sale in the ordinary course of business, in the process of production for such sale...

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Problem 18-7 (IAA)

Lagoon Company accumulated the following quarterly cost data for the current year.

Raw materials- beginning inventory

Purchases

90,000 units @ P7.00

75,000 units @ P8.00

120,000 units @ P8.50

The entity transferred 195,000 units of raw materials to work in process during the year.

Work in process – beginning inventory

Direct labor

Manufacturing overhead

Work in process – ending inventory

50,000 units @ P14.00

3,100,000

2,950,000

48,000 units @ P15.00

The entity uses the FIFO method for valuing inventory. What is the cost of goods manufactured for the current year?

a.

7,535,000

b.

8,235,000

c.

7,515,000

d.

8,280,000

7 Answer a

Beginning raw materials (90,000 x 7)

630,000

Purchases (75,000 x 8 + 120,000 x 8.50)

1,620,000

Raw materials available for use

2,250,000

Ending raw materials (90,000 x 8.50)

( 765,000)

Raw materials used

1,485,000

Direct labor

3,100,000

Manufacturing overhead

2,950,000

Total manufacturing cost

7,535,000

Beginning work in process (50,000 x 14)

700,000

Total work in process

8,235,000

Ending work in process (48,000 x 15)

( 720,000)

Cost of goods Manufactured

7,515,000

Beginning raw materials of P90, 000 units plus purchases of P75, 000 and 120,000 minus 195,000 units transferred equals 90,000 ending raw materials.

Problem 18-8 (IAA)

Hilltop Company sells a new product 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 purchase and sales records. The July purchases are as follows:

Quantity

July

5

10,000

Unit cost

65

650,000

Total cost

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 P6,000,000, or 60,000 units at P100 per unit. Hilltop has always used a periodic FIFO inventory costing system. Gross profit on sales for July was P2, 400,000. What is the cost of inventory on July 1?

a.

1,354,000

b.

2,400,000

c.

2,826,000

d.

426,000

8 Answer a

Sales

6,000,000

Gross Profit

Cost of goods sold

Inventory – July 31 (see below)

Cost of goods available for sale

Purchase for July

Inventory – July 1

Quantity

Unit cost

Total cost

July 12

25

FIFO inventory – 7/31

1,000

60

60,000

14,000

62

868,000

15,000...