Accounting 1a
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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. 2. 3. 4. 5.
Purchased 800 car seat covers on account at P1,000 each. Returned 50 defective car seat covers to suppliers and received credit. Paid 600 of the car seat covers purchased. Sold 790 car seat covers at P2,000 each. 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: Periodic System A. Purchases Accounts Payable
800,000
Accounts Payable Purchase Returns
50,000
Accounts Payable Cash
600,000
Accounts Receivable Sales
40,000
Purchase Returns Accounts Receivable
1,360,000
Inventory, End Income Summary
800,000 50,000 600,000 40,000 1,360,000 60,000 60,000
B. Inventory January 1
90,000
Add: Purchases
800,000
Less: Purchase Returns
(50,000)
Goods Available for Sale
750,000 840,000
Less: Inventory – End Cost of Goods Sold
60,000 P780,000
Perpetual System A. Inventory Accounts Payable
800,000
Accounts Payable Inventory
50,000
Accounts Payable Cash
600,000
Accounts Receivable Sales
1,580,000
Cost of Goods Sold Inventory
700,000
Sales Return Accounts Receivable
40,000
Inventory Cost of Goods Sold
20,000
Cash
1,360,000
800,000 50,000 600,000 1,580,000 700,000 40,000 20,000
Accounts Receivable Inventory Shortage Inventory
1,360,000 10,000 10,000
B. Cost of Goods Sold Inventory Shortage Adjusted Cost of Goods Sold
770,000 10,000 P780,000
Problem 10 – 8 Myriad Company revealed the following purchases transactions 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 P50,000, 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 P75,000, 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 P30,000, 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 the inventory. 4. An invoice for P90,000, 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 P140,000, 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 the inventory. Required: Prepare the adjustments on December 31. Books are still open.
Inventory Income Summary
50,000
Accounts Payable Purchase
75,000
Purchases Accounts Payable
30,000
Income Summary Inventory
90,000
Purchases Accounts Payable
140,000
50,000 75,000 30,000 90,000 140,000
Problem 10 – 9 Hero Company reported inventory on December 31, 2019 at P6,000,000 based on a physical count of goods priced at cost, and before any necessary year-end adjustment returning to the following:
Included in the physical count were goods billed to a customer FOB shipping point on December 31, 2019. The goods had cost of P125,000, and were picked up by the carrier on January 10, 2020.
Goods shipped FOB shipping point on December 28, 2019form a vendor to Hero Company were received on January 4, 2020. The invoice cost was P300,000.
What amount should be reported as inventory on December 31, 2019? a. b. c. d.
5,875,000 6,000,000 6,175,000 6,300,000
Physical Count
6,000,000
Goods Shipped (FOB Shipping point)
3000,000
Inventory
P6,300,000
Problem 10 – 10 Empty Company reported on December 31, 2019 at P2,5000,000 based on physical count price at cost and before any necessary adjustment for the following:
Merchandise costing P100,000, shipped FOB shipping point from a vendor on December 30, 2019 was received and recorded on January 5, 2020.
Goods in the shipping area were excluded from the inventory although shipment was not made until January 5, 2020. The goods billed to the customer FOB shipping point on December 30, 2019 had a cost ofP400,000.
What amount should be reported as inventory on December 31, 2019? a. b. c. d.
2,500,000 2,600,000 2,900,000 3,000,000 Physical Count Merchandise Goods in shipping area Inventory
2,500,000 100,000 2,600,000 400,000 P3,000,000
Problem 10 – 14 Kew Company reported accounts payable on December 31, 2019 at P2,200,000 before considering the following data:
Goods shipped Kew FOB shipping point on December 22, 2019 were lost in transit. The invoice cost of P40,000 was not recorded by Kew. On January 7, 2020, Kew filed a P40,000 claim against the common carrier.
On December 27, 2019, a vendor authorized Kew to return for full credit goods shipped and billed at P70,000 on December 15, 2019. The returned goods were shipped by Kew on December 28, 2019. A P70,000 credit memo was received and recorded by Kew on January 5, 2020.
On December 31, 2019, Kew has a P500,000 debit balance in accounts payable to Ross, a supplier, resulting from a P500,000 advance payment for foods to be manufactured.
What amount should be reported as accounts payable on December 31, 2019? a. b. c. d.
2,170,000 2,680,000 2,730,000 2,670,000 Accounts Payable per book Goods shipped FOB shipping point Purchase Returns Advance Payments Adjusted Accounts Payable
2,200,000 40,000 ( 70,000) 500,000 P2, 670,000
Problem 10 – 17 Audacity Company counted the ending inventory on December 31, 2019 and reported the amount of P2,000,000 before any corrections. None of the following items were included when the total amount of the ending inventory was computed:
Goods located in the entity’s warehouse are on consignment from another entity
150,000
Goods sold by the entity and shipped FOB destination were in transit on December 31, 2019 and received by the customer on January 2, 2020
200,000
Goods purchased by the entity and shipped FOB shipping point were in transit on December 31, 2019 and received by the entity January 2, 2020
300,000
Goods sold by the entity and shipped FOB shipping point were in transit on December 31, 2019 and received by the customer on January 2, 2020
400,000
What amount of inventory should be reported on December 31, 2019? a. b. c. d.
2,500,000 2,350,000 2,900,000 2,750,000 Ending Inventory Goods Sold Goods Purchased Inventory
2,000,000 200,000 300,000 P2,500,000
Problem 10 – 24 Fancy Company is a wholesale distributor of automotive replacement parts. The entity revealed the following initial amounts on December 31, 2019:
Inventory at December 31 based on physical count
1,250,000
Accounts Payable
1,000,000
Sales
9,000,000
Additional information: A. Parts held on consignment from another entity to Fancy Company, the consignee, amounting to P165,000, were included in the physical count on December 31, 2019, and in accounts payable on December 31, 2019. B. P20,000 of parts which were purchased and paid for in December 2019, were sold in the last week of 2019 and appropriately recorded as sales of P28,000. The parts were included in the physical count on December 31, 2019, because the parts were on the loading dock waiting to be picked up the customers. C. Parts in transit on December 31, 2019 to customers, shipped FOB shipping point, on December 28, 2019, amounted to P34,000. The customers received the parts on January 6, 2020. Sales FOB shipping point, on December 28, 2019, amounted to P34,000. D. Retailers were holding P210,000 at cost and P250,000 at retail, of goods on consignment from Fancy Company, at their stores on December 31, 2019. E. Goods were in transit from a vendor to Fancy Company on December 31, 2019. The cost of goods was P25,000. The goods were shipped FOB shipping point on December 29, 2019.
1. What is the correct amount of inventory? a. 1,300,000 b. 1,320,000 c. 1,334,000 d. 1,090,000 2. a. b. c. d.
What is the correct amount of accounts payable? 835,000 960,000 975,000 860,000
3. a. b. c. d.
What is the correct amount of sales? 9,250,000 9,290,000 9,040,000 9,000,000
Inventory
Accounts Payable
Net Sales
Unadjusted
1, 250, 000
1, 000, 000
9,000 ,000
A
(165, 000)
(165, 000)
B
(20, 000)
C
40, 000
D
210, 000
E
25, 000
25, 000
Adjusted
1, 300, 000
860, 000
9, 040, 000
Problem 11 – 1 Bronze Company had the following transactions relating to inventory during January:
Jan.
Units
Unit Cost
1
Balance on hand
6000
150
5
Purchase
2000
200
10
Sale
4000
15
Sale
1000
20
Purchase
2500
300
25
Purchase
2000
400
31
Sale
3000
Determine the ending inventory under each of the following costing methods. 1. FIFO 2. Weighted average method – periodic (1) Jan.
Units
Unit Cost
Total Cost
Sales
1 Balance on hand
6,000
150
900,000
-
5 Purchase
2,000
200
400,000
-
-
-
-
4,000
10 Sale 15 Sale
1,000
20 Purchase
2,500
300
750,000
-
25 Purchase
2,000
400
800,000
-
-
-
-
3,000
2,850,000
8,000
31 Sale
12,500 Ending Inventory Units
12, 500
Sales
(8, 000)
Total
4, 500
Units
Unit Cost
Total Cost
January 20
2,500
300
750,000
January 25
2,000
400
800,000
4,500
1,550,000
(2) Units
Unit Cost
Total Cost
6,000
150
900,000
5 Purchases
2,000
200
400,000
20 Purchases
2,500
300
750,000
25 Purchases
2,000
400
800,000
Total goods available for sale
12, 500
January 1 Balance on hand
Weighted Average unit cost (2,850,000/12,500) Inventory Cost (4,500 x 228)
2,850,000 228 ₱1,026,000
Problem 11 – 2 Furlough Company began operations at the beginning of current year with 10,000 units of merchandise with unit cost of P80. Purchases for the current year follow: Lot No.
Units
1 2 3 4 5
Unit Cost
2000 8000 6000 9500 14,500
100 110 120 100 90
The physical inventory revealed 15,000 units on hand at eyear-end. Required: Compute inventory cost at year-end and cost of goods sold for the year following each method listed below. 1. FIFO – periodic 2. Weighted average – periodic 3. Specific identification (assuming the inventory comes from Lot 3, 6,000 units, and Lot 4, 9,000 units) (1) Units
Unit Cost
Total Cost
10,000
80
800,000
-
1Purchase
2,000
100
200,000
-
2Purchase
8,000
110
880,000
-
3Purchase
6,000
120
20,000
-
4Purchase
9,500
100
950,000
-
1,305,000
-
Beginning Inventory
5Purchase Sales
14,500
90
-
-
50,000
Ending Inventory Units
50, 000
Sales
(15, 000)
Total
35, 000
Sales
-
15,000
4,855,000
15,000
FIFO - Periodic Units
Unit Cost
Total Cost
4
20,500
100
2,050,000
5
14,500
90
1,305,000
35,000
3,355,000
Cost of Goods Sold Beginning Inventory
800,000
Add: Purchases
4,055,000
Total Goods Available for sale
4,855,000
Less: Ending Inventory
(3,355,000)
Cost of goods sold
1,500,000
(2) Units
Unit Cost
Total Cost
10,000
80
800,000
1 Purchase
2,000
100
200,000
2 Purchase
8,000
110
880,000
3 Purchase
6,000
120
20,000
4 Purchase
9,500
100
950,000
5 Purchase
14,500
Beginning Inventory
90
50,000
Weighted Average unit cost (4, 855,000/50,000) Inventory Cost (35,000 x 97.1) (3) Lot 3, 6,000 x 120
720,000
Lot 4, 9,000 x 100
900,000 ₱1,620,000
1,305,000 4,855,000
97.1 ₱3,398,000
Problem 11 – 4 Gross Company provided the following purchases and sales for the month of March:
Units
Unit Cost
March 1 Beginning
1000
270
6 Purchase
3000
250
14 Purchase
6000
280
25 Purchase
4000
210
March 9 Sale
2000
31Sale
8000
Required: Assuming the entity used perpetual system, compute the following inventory and cost of sales under: 1. FIFO 2. Moving average
(1) Purchases
Sales
Date Units Unit Cost Total Cost
Balance
Units Unit Cost Total Cost
1 6
3,000
250
750,000
9
14
6,000
280
1,680,000
25
4,000
210
840,000
1,000
270
270,000
1,000
250
250,000
Units Unit Cost Total Cost 1,000
270
270,000
1,000
270
270,000
3,000
250
750,000
2,000
250
500,000
2,000
250
500,000
6,000 4,000
31
13,000
3,270,000
2,000
250
500,000
6,000
280
1,680,000
4,000 4,000
280
1,680,000
210
210
840,000
840,000 840,000
(2)
Date
Units
Unit Cost
Mar. 1 Beg. Balance
1,000
270
270,000
6 Purchase
3,000
250
750,000
4,000
255
1,020,000
(2,000)
260
(520,000)
2,000
250
500,000
6,000
280
1,680,000
8,000
272.5
2,180,000
4,000
210
Balance 9 Sale Balance 14 Purchase Balance 25 Purchase Balance 31 Sale Balance
Total Cost
840,000
12,000
251.67
3,020,000
(8,000)
272. 5
(2,180,000)
4,000
210
840,000
Problem 11 – 12 Harlot Company began operations on January 1, 2019 and adopted the weighted average method of inventory pricing.
2019
2020
2021
Sales
3,000,000
4,000,000
4,800,000
Cost of Sales
1,500,000
2,000,000
2,400,000
Gross Income
1,500,000
2,000,000
2,400,000
Expenses
800,000
900,000
1,000,000
Net Income
700,000
1,100,000
1,400,000
Comparative Inventory Amount Weighted average
FIFO
December 31, 2019
270,000
420,000
December 31, 2020
300,000
500,000
December 31, 2021
380,000
650,000
Required: Revise the condensed comparative income statement, assuming the entity used FIFO method. 2019
2020
1,500,000
2,000,000
2,400,000
2019
(150,000)
150,000
-
2020
(200,000)
200,000
-
Cost of Sales – Average
2021
Understatement
2021
(270,000) 1,350,000
1,950,000
2,330,000
Sales
3,000,000
4,000,000
4,800,000
Cost of Sales – FIFO
1,350,000
1,950,000
2,330,000
17,650,000
2,050,000
2,470,000
Operating Expenses
(800,000)
(900,000)
(1,000,000)
Operating Income
850, 000
1,150,000
1,470,000
Gross Income
Net Income – Average
7,000,000
1,100,000
1,400,000
2019
150,000
(150,000)
-
2020
-
200,000
(200,000)
2021
-
-
270,000
850,000
1,150,000
Understanding of Ending Inventory:
Net Income - FIFO
1,470,000
Problem 11 – 13 Rocky Company provided the following inventory data for January:
Units
Units Cost
500
500
9 Purchase
1500
540
29 Purchase
500
600
January 1 Balance
Required: Compute the cost of ending inventory under FIFO and determine the cost of goods under average method.
January 1 Balance 9 Purchase 29 Purchase
Units
Unit Cost
Total Cost
500
500
250,000
1,500
540
810,000
500
600
300,000
31 Sales
Sales
750 2,500
1,360,000
Ending Inventory (2,500 – 750 = 1, 750)
FIFO – Periodic Units
Unit Cost
Total Cost
January 9
1,250
540
675,000
January 29
500
600
300,000
1,750
975,000
750
Weighted Average unit cost (1,360,000/2,500) Inventory Cost (1,750 x 544)
544 ₱952,000
Cost of Goods Sold Beginning Inventory
₱250,000
Add: Purchases
1,110,000
Total Goods Available for sale
1,360,000
Less: Ending Inventory
(952,000) 408,000
Problem 11 – 14 Landmark Company purchased a tract of unimproved land for P26,850,000. The land was improved and subdivided into residential lots at a cost of P43,500,000 These lots were all of the same size ut owing to differences in location were offered for sale at different prices as follows:
Group
No. of Lots
Sales price per lot
1
20
3,000,000
2
10
2,500,000
3
10
2,000,000
Lots unsold at the end of the year are: Group 1
5 lots
Group 2
4 lots
Group 3
3 lots
Required: Compute the cost of unsold lots at the end of the year Group
Sales Price
Fraction
Cost
1
20 x 3,000,000
60,000,000
60/105
40,200,000
2
10 x 2,500,000
25,000,000
25/105
16,750,000
3
10 x 2,000,000
20,000,000
20/105
13,400,000
105,000,000
Group
Cost per lot
70,350,000
Unsold
Cost
1
40,200,000/2
2,010,000
5
10,050,000
2
16,750,000/10
1,675,000
4
6,700,000
3
13,400,000/10
1,340,000
3
4,020,000 20,770,000
Problem 11 – 16 Massive Company provided the following information for the current year:
Units
Unit Cost
Total cost
January 1 Inventory on hand
200
1500
300,000
April
3 Purchase
300
1750
525,000
October 1 Purchase
500
2000
1,000,000
`
1000
1,825,000
The entity sold 400 units on June 25 and 400 on December 10. What is the weighted average cost of the inventory at year-end? a. b. c. d.
350,000 400,000 730,000 365,000
Sales June 25
400
Dec. 10
400 800
Ending Inventory 1000 800 200
Weighted Average unit cost (1, 825,000/1,000) Inventory Cost (200 x 1,825)
1,825 P 365,000
Problem 11 – 17 Jailbird Company provided the following data about the inventory for the month of January:
Jan
Units
Unit Cost
Total Cost
1Beginning
16,000
140
2,240,000
5Purchase
4,000
150
600,000
10 Sale
15,000
15Purchase
20,000
160
3,200,000
16P.Return
1,000
160
160,000
25 Sale
8,000
26 S. Return
4,000
31 Purchase
30,000
150
4,500,000
What is the moving average cost of the inventory on January 31? a. b. c. d.
7,625,000 7,500,000 7,690,000 7,530,000
Date
Units
Unit Cost
Total Cost
Jan. 1 Beg. Balance
16,000
140
2,240,000
5 Purchase
4,000
150
600,000
20,000
142
2,840,000
(15,000)
142
(2,130,000)
5,000
142
710,000
20,000
160
3,200,000
25,000
156.4
3,910,000
Balance 10 Sale Balance 15 Purchase Balance
16 Purchase Return Balance 20 Sale Balance 26 Sales Return Balance 31 Purchase Balance
(1,000)
160
(160,000)
24,000
156.25
3,750,000
(8,000)
156.25
1,250,000
16,000
156.25
2,500,000
4,000
156.25
625,000
20,000
156.25
3,125,000
30,000
150
4,500,000
50,000
152.5
7,625,000
1. 2. 3. 4. 5.
Purchased 800 car seat covers on account at P1,000 each. Returned 50 defective car seat covers to suppliers and received credit. Paid 600 of the car seat covers purchased. Sold 790 car seat covers at P2,000 each. 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: Periodic System A. Purchases Accounts Payable
800,000
Accounts Payable Purchase Returns
50,000
Accounts Payable Cash
600,000
Accounts Receivable Sales
40,000
Purchase Returns Accounts Receivable
1,360,000
Inventory, End Income Summary
800,000 50,000 600,000 40,000 1,360,000 60,000 60,000
B. Inventory January 1
90,000
Add: Purchases
800,000
Less: Purchase Returns
(50,000)
Goods Available for Sale
750,000 840,000
Less: Inventory – End Cost of Goods Sold
60,000 P780,000
Perpetual System A. Inventory Accounts Payable
800,000
Accounts Payable Inventory
50,000
Accounts Payable Cash
600,000
Accounts Receivable Sales
1,580,000
Cost of Goods Sold Inventory
700,000
Sales Return Accounts Receivable
40,000
Inventory Cost of Goods Sold
20,000
Cash
1,360,000
800,000 50,000 600,000 1,580,000 700,000 40,000 20,000
Accounts Receivable Inventory Shortage Inventory
1,360,000 10,000 10,000
B. Cost of Goods Sold Inventory Shortage Adjusted Cost of Goods Sold
770,000 10,000 P780,000
Problem 10 – 8 Myriad Company revealed the following purchases transactions 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 P50,000, 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 P75,000, 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 P30,000, 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 the inventory. 4. An invoice for P90,000, 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 P140,000, 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 the inventory. Required: Prepare the adjustments on December 31. Books are still open.
Inventory Income Summary
50,000
Accounts Payable Purchase
75,000
Purchases Accounts Payable
30,000
Income Summary Inventory
90,000
Purchases Accounts Payable
140,000
50,000 75,000 30,000 90,000 140,000
Problem 10 – 9 Hero Company reported inventory on December 31, 2019 at P6,000,000 based on a physical count of goods priced at cost, and before any necessary year-end adjustment returning to the following:
Included in the physical count were goods billed to a customer FOB shipping point on December 31, 2019. The goods had cost of P125,000, and were picked up by the carrier on January 10, 2020.
Goods shipped FOB shipping point on December 28, 2019form a vendor to Hero Company were received on January 4, 2020. The invoice cost was P300,000.
What amount should be reported as inventory on December 31, 2019? a. b. c. d.
5,875,000 6,000,000 6,175,000 6,300,000
Physical Count
6,000,000
Goods Shipped (FOB Shipping point)
3000,000
Inventory
P6,300,000
Problem 10 – 10 Empty Company reported on December 31, 2019 at P2,5000,000 based on physical count price at cost and before any necessary adjustment for the following:
Merchandise costing P100,000, shipped FOB shipping point from a vendor on December 30, 2019 was received and recorded on January 5, 2020.
Goods in the shipping area were excluded from the inventory although shipment was not made until January 5, 2020. The goods billed to the customer FOB shipping point on December 30, 2019 had a cost ofP400,000.
What amount should be reported as inventory on December 31, 2019? a. b. c. d.
2,500,000 2,600,000 2,900,000 3,000,000 Physical Count Merchandise Goods in shipping area Inventory
2,500,000 100,000 2,600,000 400,000 P3,000,000
Problem 10 – 14 Kew Company reported accounts payable on December 31, 2019 at P2,200,000 before considering the following data:
Goods shipped Kew FOB shipping point on December 22, 2019 were lost in transit. The invoice cost of P40,000 was not recorded by Kew. On January 7, 2020, Kew filed a P40,000 claim against the common carrier.
On December 27, 2019, a vendor authorized Kew to return for full credit goods shipped and billed at P70,000 on December 15, 2019. The returned goods were shipped by Kew on December 28, 2019. A P70,000 credit memo was received and recorded by Kew on January 5, 2020.
On December 31, 2019, Kew has a P500,000 debit balance in accounts payable to Ross, a supplier, resulting from a P500,000 advance payment for foods to be manufactured.
What amount should be reported as accounts payable on December 31, 2019? a. b. c. d.
2,170,000 2,680,000 2,730,000 2,670,000 Accounts Payable per book Goods shipped FOB shipping point Purchase Returns Advance Payments Adjusted Accounts Payable
2,200,000 40,000 ( 70,000) 500,000 P2, 670,000
Problem 10 – 17 Audacity Company counted the ending inventory on December 31, 2019 and reported the amount of P2,000,000 before any corrections. None of the following items were included when the total amount of the ending inventory was computed:
Goods located in the entity’s warehouse are on consignment from another entity
150,000
Goods sold by the entity and shipped FOB destination were in transit on December 31, 2019 and received by the customer on January 2, 2020
200,000
Goods purchased by the entity and shipped FOB shipping point were in transit on December 31, 2019 and received by the entity January 2, 2020
300,000
Goods sold by the entity and shipped FOB shipping point were in transit on December 31, 2019 and received by the customer on January 2, 2020
400,000
What amount of inventory should be reported on December 31, 2019? a. b. c. d.
2,500,000 2,350,000 2,900,000 2,750,000 Ending Inventory Goods Sold Goods Purchased Inventory
2,000,000 200,000 300,000 P2,500,000
Problem 10 – 24 Fancy Company is a wholesale distributor of automotive replacement parts. The entity revealed the following initial amounts on December 31, 2019:
Inventory at December 31 based on physical count
1,250,000
Accounts Payable
1,000,000
Sales
9,000,000
Additional information: A. Parts held on consignment from another entity to Fancy Company, the consignee, amounting to P165,000, were included in the physical count on December 31, 2019, and in accounts payable on December 31, 2019. B. P20,000 of parts which were purchased and paid for in December 2019, were sold in the last week of 2019 and appropriately recorded as sales of P28,000. The parts were included in the physical count on December 31, 2019, because the parts were on the loading dock waiting to be picked up the customers. C. Parts in transit on December 31, 2019 to customers, shipped FOB shipping point, on December 28, 2019, amounted to P34,000. The customers received the parts on January 6, 2020. Sales FOB shipping point, on December 28, 2019, amounted to P34,000. D. Retailers were holding P210,000 at cost and P250,000 at retail, of goods on consignment from Fancy Company, at their stores on December 31, 2019. E. Goods were in transit from a vendor to Fancy Company on December 31, 2019. The cost of goods was P25,000. The goods were shipped FOB shipping point on December 29, 2019.
1. What is the correct amount of inventory? a. 1,300,000 b. 1,320,000 c. 1,334,000 d. 1,090,000 2. a. b. c. d.
What is the correct amount of accounts payable? 835,000 960,000 975,000 860,000
3. a. b. c. d.
What is the correct amount of sales? 9,250,000 9,290,000 9,040,000 9,000,000
Inventory
Accounts Payable
Net Sales
Unadjusted
1, 250, 000
1, 000, 000
9,000 ,000
A
(165, 000)
(165, 000)
B
(20, 000)
C
40, 000
D
210, 000
E
25, 000
25, 000
Adjusted
1, 300, 000
860, 000
9, 040, 000
Problem 11 – 1 Bronze Company had the following transactions relating to inventory during January:
Jan.
Units
Unit Cost
1
Balance on hand
6000
150
5
Purchase
2000
200
10
Sale
4000
15
Sale
1000
20
Purchase
2500
300
25
Purchase
2000
400
31
Sale
3000
Determine the ending inventory under each of the following costing methods. 1. FIFO 2. Weighted average method – periodic (1) Jan.
Units
Unit Cost
Total Cost
Sales
1 Balance on hand
6,000
150
900,000
-
5 Purchase
2,000
200
400,000
-
-
-
-
4,000
10 Sale 15 Sale
1,000
20 Purchase
2,500
300
750,000
-
25 Purchase
2,000
400
800,000
-
-
-
-
3,000
2,850,000
8,000
31 Sale
12,500 Ending Inventory Units
12, 500
Sales
(8, 000)
Total
4, 500
Units
Unit Cost
Total Cost
January 20
2,500
300
750,000
January 25
2,000
400
800,000
4,500
1,550,000
(2) Units
Unit Cost
Total Cost
6,000
150
900,000
5 Purchases
2,000
200
400,000
20 Purchases
2,500
300
750,000
25 Purchases
2,000
400
800,000
Total goods available for sale
12, 500
January 1 Balance on hand
Weighted Average unit cost (2,850,000/12,500) Inventory Cost (4,500 x 228)
2,850,000 228 ₱1,026,000
Problem 11 – 2 Furlough Company began operations at the beginning of current year with 10,000 units of merchandise with unit cost of P80. Purchases for the current year follow: Lot No.
Units
1 2 3 4 5
Unit Cost
2000 8000 6000 9500 14,500
100 110 120 100 90
The physical inventory revealed 15,000 units on hand at eyear-end. Required: Compute inventory cost at year-end and cost of goods sold for the year following each method listed below. 1. FIFO – periodic 2. Weighted average – periodic 3. Specific identification (assuming the inventory comes from Lot 3, 6,000 units, and Lot 4, 9,000 units) (1) Units
Unit Cost
Total Cost
10,000
80
800,000
-
1Purchase
2,000
100
200,000
-
2Purchase
8,000
110
880,000
-
3Purchase
6,000
120
20,000
-
4Purchase
9,500
100
950,000
-
1,305,000
-
Beginning Inventory
5Purchase Sales
14,500
90
-
-
50,000
Ending Inventory Units
50, 000
Sales
(15, 000)
Total
35, 000
Sales
-
15,000
4,855,000
15,000
FIFO - Periodic Units
Unit Cost
Total Cost
4
20,500
100
2,050,000
5
14,500
90
1,305,000
35,000
3,355,000
Cost of Goods Sold Beginning Inventory
800,000
Add: Purchases
4,055,000
Total Goods Available for sale
4,855,000
Less: Ending Inventory
(3,355,000)
Cost of goods sold
1,500,000
(2) Units
Unit Cost
Total Cost
10,000
80
800,000
1 Purchase
2,000
100
200,000
2 Purchase
8,000
110
880,000
3 Purchase
6,000
120
20,000
4 Purchase
9,500
100
950,000
5 Purchase
14,500
Beginning Inventory
90
50,000
Weighted Average unit cost (4, 855,000/50,000) Inventory Cost (35,000 x 97.1) (3) Lot 3, 6,000 x 120
720,000
Lot 4, 9,000 x 100
900,000 ₱1,620,000
1,305,000 4,855,000
97.1 ₱3,398,000
Problem 11 – 4 Gross Company provided the following purchases and sales for the month of March:
Units
Unit Cost
March 1 Beginning
1000
270
6 Purchase
3000
250
14 Purchase
6000
280
25 Purchase
4000
210
March 9 Sale
2000
31Sale
8000
Required: Assuming the entity used perpetual system, compute the following inventory and cost of sales under: 1. FIFO 2. Moving average
(1) Purchases
Sales
Date Units Unit Cost Total Cost
Balance
Units Unit Cost Total Cost
1 6
3,000
250
750,000
9
14
6,000
280
1,680,000
25
4,000
210
840,000
1,000
270
270,000
1,000
250
250,000
Units Unit Cost Total Cost 1,000
270
270,000
1,000
270
270,000
3,000
250
750,000
2,000
250
500,000
2,000
250
500,000
6,000 4,000
31
13,000
3,270,000
2,000
250
500,000
6,000
280
1,680,000
4,000 4,000
280
1,680,000
210
210
840,000
840,000 840,000
(2)
Date
Units
Unit Cost
Mar. 1 Beg. Balance
1,000
270
270,000
6 Purchase
3,000
250
750,000
4,000
255
1,020,000
(2,000)
260
(520,000)
2,000
250
500,000
6,000
280
1,680,000
8,000
272.5
2,180,000
4,000
210
Balance 9 Sale Balance 14 Purchase Balance 25 Purchase Balance 31 Sale Balance
Total Cost
840,000
12,000
251.67
3,020,000
(8,000)
272. 5
(2,180,000)
4,000
210
840,000
Problem 11 – 12 Harlot Company began operations on January 1, 2019 and adopted the weighted average method of inventory pricing.
2019
2020
2021
Sales
3,000,000
4,000,000
4,800,000
Cost of Sales
1,500,000
2,000,000
2,400,000
Gross Income
1,500,000
2,000,000
2,400,000
Expenses
800,000
900,000
1,000,000
Net Income
700,000
1,100,000
1,400,000
Comparative Inventory Amount Weighted average
FIFO
December 31, 2019
270,000
420,000
December 31, 2020
300,000
500,000
December 31, 2021
380,000
650,000
Required: Revise the condensed comparative income statement, assuming the entity used FIFO method. 2019
2020
1,500,000
2,000,000
2,400,000
2019
(150,000)
150,000
-
2020
(200,000)
200,000
-
Cost of Sales – Average
2021
Understatement
2021
(270,000) 1,350,000
1,950,000
2,330,000
Sales
3,000,000
4,000,000
4,800,000
Cost of Sales – FIFO
1,350,000
1,950,000
2,330,000
17,650,000
2,050,000
2,470,000
Operating Expenses
(800,000)
(900,000)
(1,000,000)
Operating Income
850, 000
1,150,000
1,470,000
Gross Income
Net Income – Average
7,000,000
1,100,000
1,400,000
2019
150,000
(150,000)
-
2020
-
200,000
(200,000)
2021
-
-
270,000
850,000
1,150,000
Understanding of Ending Inventory:
Net Income - FIFO
1,470,000
Problem 11 – 13 Rocky Company provided the following inventory data for January:
Units
Units Cost
500
500
9 Purchase
1500
540
29 Purchase
500
600
January 1 Balance
Required: Compute the cost of ending inventory under FIFO and determine the cost of goods under average method.
January 1 Balance 9 Purchase 29 Purchase
Units
Unit Cost
Total Cost
500
500
250,000
1,500
540
810,000
500
600
300,000
31 Sales
Sales
750 2,500
1,360,000
Ending Inventory (2,500 – 750 = 1, 750)
FIFO – Periodic Units
Unit Cost
Total Cost
January 9
1,250
540
675,000
January 29
500
600
300,000
1,750
975,000
750
Weighted Average unit cost (1,360,000/2,500) Inventory Cost (1,750 x 544)
544 ₱952,000
Cost of Goods Sold Beginning Inventory
₱250,000
Add: Purchases
1,110,000
Total Goods Available for sale
1,360,000
Less: Ending Inventory
(952,000) 408,000
Problem 11 – 14 Landmark Company purchased a tract of unimproved land for P26,850,000. The land was improved and subdivided into residential lots at a cost of P43,500,000 These lots were all of the same size ut owing to differences in location were offered for sale at different prices as follows:
Group
No. of Lots
Sales price per lot
1
20
3,000,000
2
10
2,500,000
3
10
2,000,000
Lots unsold at the end of the year are: Group 1
5 lots
Group 2
4 lots
Group 3
3 lots
Required: Compute the cost of unsold lots at the end of the year Group
Sales Price
Fraction
Cost
1
20 x 3,000,000
60,000,000
60/105
40,200,000
2
10 x 2,500,000
25,000,000
25/105
16,750,000
3
10 x 2,000,000
20,000,000
20/105
13,400,000
105,000,000
Group
Cost per lot
70,350,000
Unsold
Cost
1
40,200,000/2
2,010,000
5
10,050,000
2
16,750,000/10
1,675,000
4
6,700,000
3
13,400,000/10
1,340,000
3
4,020,000 20,770,000
Problem 11 – 16 Massive Company provided the following information for the current year:
Units
Unit Cost
Total cost
January 1 Inventory on hand
200
1500
300,000
April
3 Purchase
300
1750
525,000
October 1 Purchase
500
2000
1,000,000
`
1000
1,825,000
The entity sold 400 units on June 25 and 400 on December 10. What is the weighted average cost of the inventory at year-end? a. b. c. d.
350,000 400,000 730,000 365,000
Sales June 25
400
Dec. 10
400 800
Ending Inventory 1000 800 200
Weighted Average unit cost (1, 825,000/1,000) Inventory Cost (200 x 1,825)
1,825 P 365,000
Problem 11 – 17 Jailbird Company provided the following data about the inventory for the month of January:
Jan
Units
Unit Cost
Total Cost
1Beginning
16,000
140
2,240,000
5Purchase
4,000
150
600,000
10 Sale
15,000
15Purchase
20,000
160
3,200,000
16P.Return
1,000
160
160,000
25 Sale
8,000
26 S. Return
4,000
31 Purchase
30,000
150
4,500,000
What is the moving average cost of the inventory on January 31? a. b. c. d.
7,625,000 7,500,000 7,690,000 7,530,000
Date
Units
Unit Cost
Total Cost
Jan. 1 Beg. Balance
16,000
140
2,240,000
5 Purchase
4,000
150
600,000
20,000
142
2,840,000
(15,000)
142
(2,130,000)
5,000
142
710,000
20,000
160
3,200,000
25,000
156.4
3,910,000
Balance 10 Sale Balance 15 Purchase Balance
16 Purchase Return Balance 20 Sale Balance 26 Sales Return Balance 31 Purchase Balance
(1,000)
160
(160,000)
24,000
156.25
3,750,000
(8,000)
156.25
1,250,000
16,000
156.25
2,500,000
4,000
156.25
625,000
20,000
156.25
3,125,000
30,000
150
4,500,000
50,000
152.5
7,625,000
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