Chp10,15Summer Company is a wholesaler of car seat covers. At the beginning of the current year The entity\'s inventory consisted of 90 car seat covers priced at P1, 000 each. During the current year, PDF

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Problem 10- Amiable Company provided the following data at year end:Items counted in the bodega 4,000, Items included in the count specifically segregated per sales contract 10 0, Items in receiving department, returned by customer, in good condition 50 , Items ordered and in the receiving departmen...

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Problem 10-1 Amiable Company provided the following data at year end: Items counted in the bodega Items included in the count specifically segregated per sales contract Items in receiving department, returned by customer, in good condition Items ordered and in the receiving department, invoice not received Items ordered; invoice received but goods not received. Freight is paid by the seller Items shipped today, invoice mailed, FOB shipping point Items shipped today, invoice mailed, FOB destination Items currently being used for window display Items on counter for sale Items in receiving department, refused by us because of damage Items included in count, damaged and unsalable Items in the shipping department

4,000,000 100,000 50,000 400,000 300,000 250,000 150,000 200,000 800,000 180,000 50,000 250,000

Required: Compute the correct amount of inventory. Answer: Items counted in the bodega Items included in the count specifically segregated Items in returned by customer Items ordered and in the receiving department, Items shipped today, invoice mailed, FOB destination Items for window display Items on counter for sale Items in receiving department, refused by us because of damage Items included in count, damaged and unsalable Items in the shipping department Total correct amount of inventory

4,000,000 (100,000) 50,000 400,000 150,000 200,000 800,000 180,000 ( 50,000) 250,000 P5,700,000

Problem 10-2 Natal Company provided the following information: Materials Advances for materials ordered Goods in process Unexpired insurance on inventories Advertising catalogs and shipping cartons Finished goods in factory Finished goods in company-owned retail store, including 50% profit on cost Finished goods in hands of consignee including 40% profit on sales Finished goods in transit to customers, shipped FOB destination, at cost Finished goods out on approval, at cost Unsalable finished goods, at cost Office supplies Materials in transit shipped FOB shipping point, excluding freight of P 30,000 Goods held on consignment, at sales price, cost P 150,000

1,400,000 200,000 650,000 60,000 150,000 2,000,000 750,000 400,000 250,000 100,000 50,000 40,000 330,000 200,000

Required: Compute the correct amount of inventory.

Answer: Materials Goods in process Finished goods in factory Finished goods in company-owned retail store, including 50% profit on cost(750,000/150%) Finished goods in hands of consignee(400,000x60%) Finished goods in transit Finished goods out on approval Materials in transit (330,000+30,000) Total inventory

1,400,000 650,000 2,000,000 500,000 240,000 250,000 100,000 330,000 5,500,000

Problem 10-3 Luminous Company provided the following information at the current year-end: Finished goods in the storeroom, at cost including the overhead of P400,000 Finished goods in transit, including freight charge of P20,000, FOB shipping point Finished goods held by salesmen, at selling price, at cost, P100,000 Goods in process, at cost of materials and direct labor Materials Materials in transit, FOB destination Defective materials returned to suppliers for replacement Shipping supplies Gasoline and oil for testing finished goods Machine lubricants

2,000,000 250,000 140,000 720,000 1,000,000 50,000 100,000 20,000 110,000 60,000

Required: Compute for the cost of inventory at year-end. Answer: Finished goods in the storeroom, Finished goods held by salesmen, Goods in process Materials Factory supplies: Gasoline and oil for testing finished goods Machine lubricants Total inventory

2,000,000 100,000 900,000 1,000,000 110,000 60,000 4,170,000

Goods in process, including overhead Overhead Goods in process, excluding overhead

100% 20% 80%

Total cost of goods in process(720,000/80%)

900,000

Problem 10-4 Summer Company is a wholesaler of car seat covers. At the beginning of the current year The entity's inventory consisted of 90 car seat covers priced at P1, 000 each. During the current year, the following events occurred: 1. Purchased 800 car seat covers on account at P1,000 each 2. Returned 50 defective car seat covers to supplier and received credit 3. Paid 600 of the car seat covers purchased 4. Sold 790 car seat covers at P2, 000 each 5. Received 20 car seat covers returned by a customer and gave credit. The goods were in excellent condition. 6. Received cash for 680 of the car seat covers sold 7. Physical count at year end revealed 60 units on hand Required: a. Prepare journal entries, including adjustments to record the above transactions assuming the company uses periodic system and perpetual system b. Determine the cost of sales under each inventory system Answer: a. Periodic System Purchases

800,000

Accounts Payable 800,000 To record purchase of car seat covers on account, P 800, 000 (800 x 1 000) Accounts Payable 50,000 Purchased Returns 50,000 To record returned of defective car seat covers to supplier, P 50 000 (50 x 1 000) Accounts Payable 600,000 Cash 600,000 Payment of 600 car seat covers purchased, P600, 000 (600 x 1 000) Accounts Receivable 1,580,000 Sales 1,580,000 To record the sale of car seat covers, P1, 580,000 (790 x 2 000)

Sales Returns and Allowances 40,000 Accounts Receivable 40,000 To record returned of car seat covers by customer, P40, 000 (20 x 2 000) Cash

1,360,000

Accounts Receivable 1,360,000 To record the received cash of 680 car seat covers, P 1, 360, 000 (680 x 2 000) Inventory

60, 000

Income Summary To record the adjustment at ending inventory (60 x 1 000)

60,000

Perpetual System Merchandise Inventory 800,000 Accounts Payable 800, 000 To record the purchase of car seat covers on account, P 800, 000 (800 x 1 000) Accounts Payable 50,000 Merchandise Inventory 50,000 To record the return of defective car seat covers to supplier, P50,000(50 x 1 000) Accounts Payable 600,000 Cash 600,000 To record payment of 600 car seat covers purchased, P600, 000 (600 x 1 000) Accounts Receivable 1,580,000 Sales 1,580,000 To record the sale of car seat covers, P1, 580,000 (790 x 2 000) Sales Return

40,000 Accounts Receivable 40,000 To record returned of car seat covers by customer, P40, 000 (20 x 2 000) Cash

1,360,000

Accounts Receivable 1,360,000 To record received cash of 680car seat covers, P 1, 360, 000 (680 x 2 000) Inventory Shortage Merchandise Inventory To record adjustment at ending inventory

10, 000 10, 000

Merchandise Inventory per book Physical Count Shortage

70, 000 60, 000 10, 000

b. Cost of Sales Periodic System Beginning Inventory Add: Purchases Less: Purchase Returns and Allowances Total goods available for sale Less: Ending Inventory Cost of goods sale

90, 000 800, 000 (50, 000) 840, 000 (60, 000) 780, 000

Perpetual System Cost of Sales Inventory Shortage Adjusted Cost of Sales

770, 000 10, 000 780, 000

Problem 10-5 Winter Company received quotations from two entities for an item of merchandise as follows: From Company A: List price P500, 000, less 20-10-10, FOB Shipping point, 2/10, n/30 From Company B: List price P500, 000, less 35%, FOB shipping point, 2/10, n/30 Required: For each quotation, compute the invoice amount and the amount to be paid by the buyer within the discount period.

Answer: Company A List Price Less: First Trade Discount ( 500 000 x 0.20) Second Trade Discount ( 400 000 x 0.10) Third Trade Discount ( 360 000 x 0.10) Invoice Price Less: Cash Discount (324 000 x 0.02) Payment within discount period

500,000 (100,000) 400,000 (40,000) 360,000 36,000 324,000 (6,840) 317,520

Company B List Price Less: Trade Discount (500 000 x 0.35) Invoice Price Less: Cash Discount (325 000 x 0.02) Payment within discount period

500,000 (175,000) 325,000 (6,500) 318,500

Problem 10-6 Autumn Company provided the following transactions for the current year, the first year of operations: 1. Purchase of merchandise at an invoice price of P4, 750,000 excluding freight. Terms are 2/10, n/30 2. Freight paid, P250, 000. The freight is allocated to each purchase. 3. Cash payment on purchases, P3, 717,000 of which P1, 617,000 was paid within the 2% discount period 4. It is expected that all discounts on unpaid accounts payable will be lost 5. On December 31, one fifth of the merchandise remained on hand. Required: a. Prepare journal entries to record the transaction using gross method and net method b. Compute inventory and cost of sales under each method

Answer: a. GROSS METHOD Purchases

4, 750, 000 Accounts Payable To record purchase of merchandise on account. Freight in

4, 750, 000

250, 000

Cash To record the freight paid.

250, 000

Accounts Payable 1, 650, 000 Cash 1, 617, 000 Purchase Discount 33, 000 To record the payment of purchase and the cash discount within the discount period Accounts Payable Cash To record the payment of purchase

2, 100, 000 2, 100, 000

No Entry Inventory

1, 000, 000

Income Summary To record the remaining inventory

1, 000, 000

NET METHOD Purchases

4, 655, 000 Accounts Payable To record purchase of merchandise on account. Freight in Cash To record the freight paid.

4, 655, 000

250, 000 250, 000

Accounts Payable 1, 617, 000 Cash 1, 617, 000 To record the payment of purchase within discount period

Accounts Payable Purchase Discount Lost Cash To record the payment of purchase Purchase Discount Lost Accounts Payable To record the lost purchase discount Inventory

2, 058, 000 42, 000 2, 100, 000

20, 000 20, 000

981, 000

Income Summary To record the remaining inventory

981, 000

b. COST OF SALES GROSS METHOD Purchases Freight in Total Less: Purchase Discounts Goods Available for Sale Less: Inventory Cost of Sales

4,750,000 250,000 5,000,000 (33,000) 4,967,000 (1,000,000) 3,967,000

NET METHOD Purchases Freight in Goods Available for Sale Less: Inventory Cost of Sales Ending Inventory Gross Method (5, 000, 000 / 5) = 1, 000, 000 Net Method (4, 905, 000 / 5) = 981, 000

4,655,000 250,000 4,905,000 981,000 3,924,000

Problem 10-7 Fall Company began operations in the current year. The entity used a perpetual inventory system. 1. During the year, Fall Company purchased merchandise having a gross invoice cost of P1,000,000. All purchases were made under the terms 2/10,n/30; FOB destinations 2. Fall Company paid freight charge of P50,000 3. During the year, Fall Company paid for 80% of the merchandise within the discount period 4. The remaining 20% was paid beyond the discount period 5. Fall Company sold 70% of the merchandise it acquired for cash of P1,200,000. The other 30% remained in inventory at year-end Required: Prepare journal entries to record the transaction using gross method and net method. Problem 10-8 Myriad Company revealed the following purchase transaction occurred during the last few days of the fiscal year, which ends December 31, and in the first few days after that date. 1. An invoice for P 50,000, FOB shipping point, was received and recorded on December 27. The shipment was received in satisfactory condition on January 2. The merchandise was not included in the inventory. 2. An invoice for P 75,000, FOB Destination, was received and recorded on December 28. The shipment was received in satisfactory condition on January 3. The merchandise was not included in the inventory 3. An invoice for P 30,000, FOB shipping point, was received and recorded on January 4. The invoice shows that the goods had been shipped on December 28 and the receiving report indicates that the goods had been received on January 4. The merchandise was excluded from inventory 4. An invoice for P 90,000, FOB shipping point, was received on December 15. The receiving report indicates that the goods were received on December 18 but across the face of the report is the notation “merchandise not of the same quality as ordered – returned for credit, December 19”. The merchandise was included in the inventory. 5. An invoice for P 140,000, FOB Destination, was received and recorded on January 4. The receiving report indicates that the goods were received on December 29. The merchandise was included in inventory. Required: Prepare the adjustments on December 31. Books are still open.

Answer: Inventory, 12/31 Income Summary

50,000 50,000

Analysis: Myriad Company is the buyer. FOB Shipping point – owner is Myriad Co. At December 31 – Purchases/AP (+) correct At December 31 – Excluded in EI (AJE Accounts Payable Purchases

75,000 75,000

Analysis: Myriad Company is the buyer. FOB Destination – not yet owned (in transit) At December 31 – Purchases/AP (+) (AJE) At December 31 – Excluded in EI correct Purchases

30,000 Accounts Payable

Inventory, 12/31 Income Summary

30,000 30,000 30,000

Analysis: Myriad Company is the buyer. FOB Shipping point – owner is Myriad Co. At December 31 – Purchases/AP (x) (AJE) At December 31 – Excluded in EI (x) (AJE) Income Summary Inventory, 12/31

90,000 90,000

Analysis: Myriad Company is the buyer. Received on December 18, marked for return At December 31 – Purchases/AP (+) (AJE) At December 31 – Included in EI (AJE)

Purchases

140,000 Accounts Payable

140,000

Analysis: Myriad Company is the buyer. Received on December 29, marked for return FOB Destination – owner is Myriad Co. At December 31 – Purchases/AP (x) (AJE) At December 31 – Included in EI (correct)

Problem 10-9 Corolla Company incurred the following costs: Materials Storage costs Delivery to customers Irrecoverable Taxes

700,000 180,000 40,000 60,000

At what amount should the inventory be measured? a. b. c. d.

880,000 760,000 980,000 940,000

Solution: Materials Irrecoverable Taxes Total cost of Inventory

700,000 60,000 760,000

Problem 10-10 At year-end. Kerr Company purchased goods costing P500,000 FOB destination. These goods were received at year-end. The costs incurred in connection with the sale and delivery of the goods were: Packaging for shipment Shipping Special handling charges

10,000 15,000 25,000

What total cost should be included in inventory? a. 545,000 b. 535,000 c. 520,000 d. 500,000 Problem 10-11 Seafood Trading Co. commenced operations during the year as a large importer and exporter of seafood. The imports were all from one country overseas. The export sales were conducted as drop shipments and were merely transshipped at Seattle. The entity reported the following data: Purchases during the year Shipping costs from overseas Shipping costs to export customers Inventory at year end

12,000,000 1.500,000 1,000,000 3,000,000

What amount of shipping costs should be included in year-end inventory valuation? a. b. c. d.

250,000 625,000 375,000 0

Solution The shipping costs from overseas are inventory costs. Three quarters of the inventory was sold while one quarter remains; thus three quarters of the shipping costs from overseas have already been included in Cost of Goods Sold while one quarter, $375,000, remains in ending inventory ((1/4) X 1.5 million = 375,000). The shipping costs to export customers are selling costs and are not included in inventory. Problem 10-12 Stone Company had the following consignment transactions during the current year: Inventory shipped on consignment to a consignee Freight paid by Stone Company Inventory received on consignment from a consignor Freight by consignor

600,000 50,000 800,000 50,000

No sales of consigned goods were made during the current year. What amount should be reported as consigned inventory at year-end?

a. b. c. d.

700,000 650,000 850,000 600,000

Problem 10-13 On October 1, 2021, Grimm Company consigned 40 freezers to Holden Company costing P14,000 each for sales at P20,000 each and paid P16,000 in transportation costs. On December 30,2021, Holden Company reported the sale of 10 freezers and remitted P170,000. The remittance was net of the agreed 15% commission. What amount should be reported as consignment sales revenue for 2021? a. b. c. d.

154,000 170,000 196,000 200,000

Problem 10-14 Gray Company regularly buys sweaters and is allowed a trade discount of 20% and 10%. The entity made a purchase during the year and received an invoice with a list price of P900,000, a freight charge of P50,000, and payment terms of net 30 days. What amount should be reported as the cost of the purchase? a. b. c. d.

648,000 630,000 698,000 680,000

Problem 10-15 Brilliant Company has incurred the following costs during the current year: Cost of purchases based on vendor’s invoices Trade discounts on purchases already deducted from vendor’s invoices Import duties Freight and insurance on purchases

5,000,000

500,000 400,000 1,000,000

Other handling costs relating to imports Salaries of accounting dept. Brokerage commission paid to agents for arranging imports Sales commission paid to sales agent After sales warranty costs

100,000 600,000 200,000 300,000 250,000

What amount should be recorded as the total cost of purchases? a. b. c. d.

5,700,000 6,100,000 6,700,000 6,500,000

Solution Cost of purchases Import duties Freight and insurance Other handling cost Brokerage commission Total cost of purchases

5,000,000 400,000 1,000,000 100,000 200,000 6,700,000

The salaries of accounting department, sales commission and after sales warranty costs are not inventor able but should be expensed immediately. Problem 10-16 Clem Company provided the following inventory information for the current year:

Beginning inventory Purchases Freight in Transportation to consignees Freight out Ending inventory

Central warehouse 1,100,000 4,800,000 100,000 300,000 1,450,000

Held by consignees 120,000 600,000 50,000 80,000 200,000

What amount should be reported as the cost of goods sold for the current year? a. b. c. d.

4,550,000 4,850,000 5,070,000 5,120,000

Problem 10-17 Rabb Co. records its purchases at gross amounts but wishes to change to recording purchases net of purchase discounts. Discounts available on purchases for the current year amount to P20,000. Of this amount, P2,000 is still available in the accounts payable balance. The balances at year-end before conversion are: Purchases Purchases discounts taken Purchase discounts taken

1,000,000 8,000 300,000

1. What amount should be reported as accounts payable at year-end after the conversion? a. b. c. d.

298,000 292,000 288,000 282,000

2. Which is not included in the entry to record the conversion from gross method to net method? a. b. c. d.

Debit purchases P20,000 Debit purchases discounts P8,000 Debit purchases discount lost P10,000 Debit accounts payable P2,000

Problem 10-18 Wine Company recorded purchases at a net amount. On December 10, the entity purchased merchandise on account, P4,000,000, terms 2/10, n/30. The entity returned P300,000 of the December 10 purchase and received credit on account. The account had not been paid on December 31. At what amount should accounts payable be adjusted on December 31? a. b. c. d.

74,000 86,000 80,000 0

Problem 10-19 Hero Company reported inventory on December 31, 2020 at P6,000,000 based on a physical count of goods priced at ...