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Cedrick P. Dela RosaEasy ProblemsCorolla Company incurred the following costs:Materials 700, Storage costs 180, Delivery to customers 40, Irrecoverable Taxes 60,What amount should the inventory be measured?(Problem 26-5 , Practical Accounting 1, Valix 2016) - Cedrick P. Dela RosaMaterials 700, Irrec...

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Cedrick P. Dela Rosa Easy Problems

Corolla Company incurred the following costs: Materials Storage costs Delivery to customers Irrecoverable Taxes

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

Materials 700,000 Irrecoverable Taxes 60,000 Total cost of Inventory 760,000

What amount should the inventory be measured? (Problem 26-5 , Practical Accounting 1, Valix 2016) - Cedrick P. Dela Rosa

Bentirosa Company incurred the following costs in relation to a certain product: Direct Materials and Labor Variable production overhead Factory administrative costs Selling and Distribution costs

180,000 25,000 15,000 20,000

DM and DL VR production overhead Factory admin. Costs Correct Amount

180,000 25,000 15,000 220,000

What is the correct measurement of the product? (Problem 26-6 , Practical Accounting 1, Valix 2016) - Cedrick Dela Rosa

Fenn Company provided the following information for the current year: Merchandise purchased for resale Freight In Freight Out Purchase Return Interest on inventory loan

4,000,000 100,000 50,000 20,000 200,000

What is the inventoriable cost of the purchase? (Problem 26-7 , Practical Accounting 1, Valix 2016) - Cedrick Dela Rosa

Merchandise purchased for resale Freight In Purchase Return Inventoriable Costs

4,000,000 100,000 (20,000) 4,080,000

Moderate

Ronna Company uses the perpetual inventory system. The entity reported the following inventory transactions for the month of August: Units Unit Cost Total Cost Jan. 1 Beg Balance Jan. 6 Purchase Feb. 5 Sale Mar. 5 Purchase Mar. 8 Purchase Return Apr. 10 Sale Apr. 30 Sales Return

8,000 3,000 10,000 11,000 800 7,000 300

70.00 70.50

560,000 211,500

73.50 73.50

808,500 58,800

March 5 purchases (4500 x 73.50) 330,750

If the FIFO cost flow method is used, what is the cost of the inventory on April 30? (Problem 29-3, Practical Accounting 1, Valix 2016) - Cedrick P. Dela Rosa

Mamamiya Company uses the weighted average inventory system. The entity reported the following inventory transactions for the month of August: Units Unit Cost Jan. 1 Beg Balance 8,000 70.00 Jan. 6 Purchase 3,000 70.50 Jan. 15 Sale 10,000 Jan. 18 Purchase 11,000 73.50 Jan. 22 Purchase Return 800 73.50 Jan. 25 Sale 7,000 Jan. 30 Sales Return 300

TGAS 8000 x 70 = 560,000 3000 x 70.50= 211500 10200 x 73.50 = 749700 21200 x 71.75 = 1521200 4500 x 71.75 = 322,875

What is the cost of the inventory on Jan 30? (Problem 29-7, Practical Accounting 1, Valix 2016) - Cedrick P. Dela Rosa

Hero Company reported inventory on December 31, 2016 at P6,000,000 based on a physical count of goods priced at cost and before any necessary year-end adjustments relating to the following:  Included in the physical count were goods billed to a customer FOB shipping point on December 30, 2016. These goods had a cost of P125,000 and were picked up by the carrier on January 7,2017.  Goods shipped FOB shipping point on December 28, 2016, from a vendor to Hero were received and recorded on January 4, 2017. The invoice cost was P300,000.

Physical count 6,000,000 Goods shipped FOB sp to Hero 300,000

What amount should be reported as inventory on December 31, 2016?

6,300,000

(Problem 27-1 , Practical Accounting 1, Valix 2016) - Cedrick Dela Rosa

Difficult

Harutin mo ako Company provided the following data: Items included in the bodega 4,000,000 Items included in the specifically segregated per sale on contract 100,000 Items in receiving department, returned by customer, in good condition 50,000 Items ordered and in the receiving department 400,000 Items ordered, invoice received but goods not received. Freight is on account on seller 300,000 Items shipped today, invoice mailed, FOB shipping point 250,000 Items shipped today, invoice mailed, FOB destination 150,000 Items currently being used for window display 200,000 Items on counter for sale 800,000 Items in receiving department, refused because of damage 50,000 Items in the shipping Department 250,000 What is the correct amount of inventory? (Problem 26-1, Practical Accounting 1, Valix, 2016) – Cedrick Dela Rosa

Sana Ako Nalang Company has incurred the following costs during the current year:

Items included in the bodega 4,000,000 Items included in the specifically segregated (100,000) Items in receiving department, returned by customer, in good condition 50,000 Items ordered and in the receiving department 400,000 Items shipped today, invoice mailed, FOB destination 150,000 Items currently being used for window display 200,000 Items on counter for sale 800,000 Damage and unsalable items included in count (50,000) Items in the shipping Department 250,000 Answer: 5,700,000

Cost of purchases based On vendors’ invoices 5,000,000 Trade discounts on purchases already deducted from vendors’ invoices 500,000 Import duties 400,000 Freight & insurance on purchases 1,000,000 Other handling costs relating to imports 100,000 Salaries of accounting department 600,000 Brokerage commission paid to agents for arranging imports 200,000 Sales commission paid to sales agents 300,000 After-sales warranty costs 250,000

Cost of purchases 5,000,000 Import duties 400,000 Freight and insurance 1,000,000 Other handling costs 100,000 Brokerage commission 200,000 Total cost of purchases 6,700,000

What is the total cost of purchases? (Problem 26-4, Practical Accounting 1, Valix 2016) – Cedrick P. Dela Rosa

Umasa Company provided the following information at the end of current year. Finished goods in storeroom, at cost, including overhead of P400,000 or 20% Finished goods in transit, including freight charge of P20,000, FOB shipping point Finished goods held by salesmen, at selling price, cost, P100,000 Goods in process, at cost of materials and direct labor Materials Materials in transit, FOB destination Defective materials returned to suppliers Shipping supplies Gasoline and oil for testing finished goods

Finished goods 2,000,000 FG held by salesmen at cost 100,000 Goods in process 900,000 Materials 1,000,000 Factory supplies: Gasoline and oil 110,000 Machine lubricants 60,000 Correct inventory 4,170,000

Machine lubricants What is the correct amount of inventory? (Problem 26-3, Practical Accounting 1, Valix 2016) – Cedrick Dela Rosa

Dianna P. Pastrana Audit of Inventory Problem

Solution

Easy: 1. Ram Company provided the following information at the end of current year. Finished goods in storeroom, at cost, including overhead of P400,000 or 20% Finished goods in transit, including freight charge of P20,000, FOB shipping point Finished goods held by salesmen, at selling price, cost, P100,000 Goods in process, at cost of materials and direct labor Materials Materials in transit, FOB destination Defective materials returned to suppliers Shipping supplies Gasoline and oil for testing finished goods Machine lubricants

Answer: 4,170,000

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

Finished goods FG held by salesmen at cost Goods in process Materials 1,000,000 Factory supplies: Gasoline and oil Machine lubricants Correct inventory

Goods in process, incl. OH Overhead Goods in process, excl. OH

2,000,000 100,000 900,000

110,000 60,000

4,170,000

100% 20% 80%

Total cost of GIP (720,000/80%) 900,000 What is the correct amount of inventory? (Practical Accounting by Valix, Problem 26-3, page 307) 2. Corolla Company incurred the following costs: Materials Storage costs of finished goods Delivery to customers Irrecoverable purchase taxes

Answer: 760,000 700,000 180,000 Materials Irrecoverable Historical cost 40,000 Total cost of inventory 60,000

700,000 60,000 760,000

At what amount should the inventory be measured? (Practical Accounting by Valix, Problem 26-5, page 309) 3. Bakun Company began operations late in 2015. For the first quarter ended March 31, 2016, the entity provided the following information: Total merchandise purchased through March 15, 2016 recorded at net

Answer: 6,000,000 Purchase (4,900,000/98%) Inv., beg. (1,500,000/150%)

4,900,000

5,000,000 1,000,000

Merchandise inventory on January 1, 2016, at selling price

Total gross amt. to be paid

6,000,000

1,500,000

All merchandise was acquired on credit and no payments have been made on accounts payable since the inception of the entity. All merchandise is marked to sell at 50% above invoice cost before time discounts of 2/10, n/30. No sales were made in 2016. What amount of cash is required to eliminate the current balance in accounts payable? (Practical Accounting by Valix, Problem 27-11, page 327) Moderate 1. Leila Company conducted a physical count on December 31, 2016 which revealed a total cost of P3,600,000.

Answer: 4,030,000

Inv. Per physical count Inv. “hold for shipping inst.” However, the following items were excluded from the count: Goods in process inventory Goods shipped FOB seller Goods sold to a customer are being held for the customer to call for at the customer’s convenience 200,000 Correct inventory A packing case containing a product standing in the shipping room when the physical count was taken was not included in the inventory because it was marked “hold for shipping instructions”

80,000

Good in process held by an outside processor for further processing

300,000

Good shipped by a vendor FOB seller on Dec. 28, 2016 and received by Leila Company on January 10, 2017

3,600,000 80,000 300,000 50,000 4,030,000

50,000

What is the correct inventory on December 31,2016? (Practical Accounting by Valix, Problem 27-5, page 322) 2. Kew Co. reported accounts payable on December 31, 2016 at P2,200,000 before considering the following data:  Goods shipped to Kew FOB shipping point on December 22, 2016, were lost in transit. The invoice cost of P40,000 was not recorded by Kew. On January 7,2017, Kew filed a P40,000 claim against the

Answer: 2,670,000 A/P per book Goods shipped FOB SP on Dec. 22,2016 and lost Purchase returns

2,200,000 40,000 (70,000)

common carrier.

Advance payment error entry Adjusted A/P

500,000 2,670,000

 On December 27,2016, a vendor authorized Kew to return, for full credit, goods shipped and billed at P70,000 on December 3,2016. The returned goods were shipped by Kew on December 28,2016. A P70,000 credit memo was received and recorded by Kew on January 5,2017.  On December 31,2016, Kew has a P500,000 debit balance in accounts payable to Ross, a supplier, resulting from a P500,000 advance payment for goods to be manufactured. What amount should be reported as accounts payable on December 31, 2016? (Practical Accounting by Valix, Problem 27-7, page 324) 3. On October 31,2016, Pamela Company reported that a flood caused severe damage to the entire inventory. Based on recent history, the entity has a gross profit of 25% of sales. The following information is available from the records for ten months ended October 31, 2016: Inventory, January 1 Purchases Purchase returns Sales Sales returns Sales allowances

520,000 4,120,000 60,000 5,600,000 400,000 100,000

Answer: 3,900,000 Sales Sales returns Net sales

5,600,000 (400,000) 5,200,000

Cost ratio (100%-25%) COGS (75%*5,200,000)

75% 3,900,000

A physical inventory disclosed usable goods which can be sold for P70,000. What is the estimated cost of goods sold for the ten months ended October 31, 2016? (Practical Accounting by Valix, Problem 32-4, page 378) Difficult Answer: 2,500,000 1. Baritone Company counted and reported the ending inventory on December 31, 2016 at P2,000,000. None of the following items were included when the total amount of the ending inventory was computed:

Reported Inventory Goods sold in Transit, FOB D Purchased in Transit, FOB SP Correct amount of Inventory

2,000,000 200,000 300,000 2,500,000

Goods located in the entity’s warehouse that are on consignment from another entity

150,000

Goods sold by the entity and shipped on December 30 FOB destination were in transit on December 31,2016 and received by the customer on January 2,2017

200,000

Goods purchased by the entity and shipped on December 30 FOB shipping point in transit on December 31, 2016 and received by the entity on January 2, 2017

300,000

Goods sold by the entity and shipped on December 30 FOB shipping point were in transit on December 31, 2016 and received by customer on January 2, 2017

400,000

What is the correct amount of inventory on December 31, 2016? (Practical Accounting by Valix, Problem 27-3, page 320)

2. Joy Co. conducted a physical count on December 31, 2016 which revealed inventory with a cost of P4,410,000. The following items were excluded from the physical count: Merchandise held by Joy on consignment

610,000

Merchandise shipped by Joy FOB destination to a customer on December 31, 2016 and was received by the customer on January 5, 2017

380,000

Merchandise shipped by Joy FOB shipping point to a customer on December 31, 2016 and was received by the customer on January 5, 2017

460,000

Merchandise shipped by a vendor FOB destination on December 31, 2016 was received by the entity on January 5, 2017

830,000

Merchandise purchased FOB shipping point was shipped by the supplier on December 31, 2016 and received by Joy on January 5, 2017

510,000

Answer: 5,300,000 Physical count Goods sold in transit, FOB D. Goods purchased, FOB SP Adjusted inventory

4,410,000 380,000 510,000 5,300,000

What is the correct amount of inventory on December 31, 2016? (Practical Accounting by Valix, Problem 27-4, page 321) 3.Emco Co had the following transactions in 2016:  Emco sold goods to a customer for P50,000, FOB shipping point on December 30,2016.  Emco sold three pieces of equipment on a contract over a threeyear period. The sale price of each piece of equipment is P100,000. Delivery of each piece of equipment is on February 10 of each year In 2016, the customer paid a P200,000 down payment, and will pay P50,000 per year in 2017 and 2018. Collectability is reasonably assured.  On June 1, 2016, Emco signed a contract for P200,000 for goods to be sold on account. Payment is to be made in two installments of P100,000 each on December 1, 2016 and December 1,2017. The goods are delivered on October 1, 2016. Collection is reasonably assured and the goods may not be returned.  Emco sold goods to a customer on July 1, 2016 for P500,000. If the customer does not sell the goods to retail customers by December 31,2017, the goods can be returned to Emco. The customer sold the goods to retail customers on October 1, 2017. What amount of sales revenue should be reported in the income statement for 2016? (Practical Accounting by Valix, Problem 28-10, page 333)

Answer: 350,000 Goods sold FOB SP Delivery of 1 equip. 02/10/16 Goods sold on account Total sales revenue

50,000 100,000 200,000 350,000

Harriet Ramos (AUDITING IN INVENTORIES)

PROBLEMS

SOLUTIONS

Easy

Easy

1. Corolla Company incurred the following costs: Materials Storage costs of finished goods Delivery to customers Irrecoverable purchase taxes

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

Materials Irrecoverable purchase taxes

700,000 60,000

Total cost of inventory

760,000

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

880,000 760,000 980,000 940,000 All costs are inventoriable.

(Practical Financial Accounting, V1, pg. 309) 240,000 2. Eagle Company incurred the following costs in relation to a certain product: Direct materials and labor Variable production overhead Factory administrative costs Fixed production costs

180,000 25,000 15,000 20,000

What is the correct measurement of the product? a. 205,000 b. 225,000 c. 195,000 d. 240,000 (Practical Financial Accounting, V1, pg. 309)

3. Fen Company provided the following information for the current year: Merchandise purchased for resale Freight in Freight out Purchase returns Interest on inventory loan

Merchandise purchased Freight in Purchase returns

4,000,000 100,000 ( 20,000 )

Inventor able cost

4,080,000

4,000,000 100,000 50,000 20,000 200,000

What is the inventoriable cost of the purchase? a. b. c. d.

4,280,000 4,030,000 4,080,000 4,130,000

(Practical Financial Accounting, V1, pg. 310) Moderate Moderate 1. On December 28, 2016, Kerr Company purchased goods costing P500,000 FOB Destination. These goods were received on December 31, 2016. The costs incurred in connection with the sale and delivery of goods were: Packaging for shipment Shipping Special handling charges

10,000 15,000 25,000

On December 31, 2016, what total cost should be included in inventory? a. b. c. d.

545,000 535,000 520,000 500,000

(Practical Financial Accounting, V1, pg. 310)

Answer: 500,000 When goods are purchased FOB Destination, the seller is responsible for cost incurred in transporting the goods to the buyer.

2. Venice Company included the following in inventory at year end: Merchandise out on consignment at sales price, including 40% markup om sales Goods purchased in transit, shipped FOB Shipping point Goods held on consignment by Venice

Markup on goods on consignment (1,400,000 x 40%) Goods held on consignment Total reduction

560,000 900,000 1,460,000

1,400,000 1,200,000 900,000

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

1,460,000 3,500,000 2,300,000 1,740,000

(Practical Financial Accounting, V1, pg. 310) 3. Harris Company provided the following information for an inventory at year end: Historical cost Estimated selling price Estimated completion and selling cost Replacement cost What amount should be reported as inventory at year end? a. b. c. d.

1,100,000 1,150,000 1,200,000 1,300,000

(Practical Financial Accounting, V1, pg. 358)

Historical cost Net realizable value (1,300,000-150,000)

1,200,000 1,150,000

LCNRV

1,150,000

Difficult

Difficult

1. Joy Company conducted a physical count on December 31, 2016 which revealed inventory with a cost of P4, 410,000. The following items were excluded from physical count:  

Merchandise held by Joy on consignment Merchandise shipped by Joy FOB Destination to a customer on December 31, 2016 and was received by the customer on January 5, 2017

610,000

380,000



Merchandised shipped by Joy FOB shipping point to a customer On December 31, 2016 and was Received by the customer on January 5, 2017 460,000



Merchandise shipped by the vendor FOB destination on December 31, 2016 was received by Joy on January 5, 2017 830,000 Merchandise purchased FOB shipping point by the supplier on December 31, 2016 and received by Joy on Jan 5, 2017 510,000



What is the correct amount of inventory on December 31, 2016...