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1
CHAPTER 4 Multiple Choices – Computational 1. 2. 3. 4. 5.
b b b b b
6. 7. 8. 9. 10.
b c b a A
Multiple Choices – Computational 1.
(a) Cost of Units x Cost Materials Issued 15 x P20 = P300 10 x P15 = 150 (5 x P20) + (10 x P18) = 280 P730 Ending inventory: 5 (from 5/24 purchase) x P18 = P90 Date of Issue 5/15 5/19 5/30
2.
Purchase Lot 5/5 BI 5/5 & 5/24
(a) (10 x P15) + (20 x P20) + (15 x P18) 45
=
P18.222
Cost of materials issued: 40 x P18.222 = P729.88 Ending inventory: 5 x P18.222 = P91.11 3.
(a) Date BI 5/5 5/24
4.
Units 10 20 10 40
Unit Cost P15 20 18
(c) Purchases
Date BI 5/5 5/15 5/19 5/24 5/30 (a) (b)
Cost of Materials Issued P150 400 180 P730
Units 10 20 15 -
Unit Cost P15 20 18 -
Units 15 10 15
Issued Unit Cost P18.333 18.333 18.084
(10 x P15) + (20 x P20) / 30 = P18.333 (5 x P18.333) + (15 x P18) / 20 = P18.084
Total Cost P275.00 183.33 271.26
Units 10 30 15 5 20 5
Balance Unit Cost P15.000 18.333(a) 18.333 18.333 18.085(b) 18.084
Total Cost P150.00 550.00 275.00 91.67 361.68 90.42
2 5.
(a) Purchases
Date BI 5/5 5/15 5/19 5/24 5/30
Units 10 20 15 -
(a) (b) (c) (d)
(10 x P15) (10 x P15) (5 x P20) (5 x P15)
6.
(d)
Date 1/1 1/6 1/7 1/26 1/31
Unit Cost P15 20 18 -
Units 1,500 3,400 -
+ + + +
Units 15 10 15
(20 x P20) (5 x P20) (5 x P15) (15 x P18)
Purchases Price 10.300 10.750 -
= = = =
Issued Unit Cost P20 (c) 18
Amount 15,450 36,550 -
Issued Price 10.000 10.500
Units 1,800 3,200
(P19,550 + P15,450) / (2,000 + 1,500) = (P17,000 + P36,550) / (1,700 + 3,400) =
7.
(c) P19,550 + P15,450 + P36,550 6,900
Amount 18,000 33,600
Units 2,000 3,500 1,700 5,100 1,900
Balance Price 9.775 10.000(a) 10.000 10.500(b) 10.500
Amount 19,550 35,000 17,000 53,550 19,950
P10.000 P10.500
x 1,900 = P19,702
Issued
600 x P4.90 = P2,940
R46
175 x P4.80 = P 840
R49
225 x P4.80 = P1,080
R50
80 x P4.80 = P 384 200 x P4.90 = P 980
PO96
Total P150 550 250 75 345 P75
(a) Received
Balance PO30
Units 10 30 15 5 20 5
Balance Unit Cost P15 (a) (b) 15 (d) 15
P550 P250 P175 P345
(a) (b)
8.
Total Cost P300 175 270
400 x P4.95 = P1,980
R52
310 x P4.90 = P1,519
RM24
(20) x P4.90 = (P98)
480 480 600 305 600 80 600
x x x x x x x
Balance P4.80 = P2,304 P4.80 = P2,304 P4.90 = P2,940 P4.80 = P1,464 P4.90 = P2,940 P4.80 = P 384 P4.90 = P2,940
400 400 400 90 400 110 400
x x x x x x x
P4.90 = P4.90 = P4.95 = P4.90 = P4.95 = P4.90 ) P4.95 )=
P1,960 P1,960 P1,980 P 441 P1,980 P2,519
3 9.
(a) Received
175 x P4.856 = P 849.80
Balance * 480 x P4.80 = P2,304.00 1,080 x P4.856 = P5,244.48 905 x P4.856 = P4,394.68
R49
225 x P4.856 = P1,092.60
680 x P4.856 = P3,302.08
R50
280 x P4.856 = P1,359.68
400 x P4.856 = P1,942.40
Balance PO30 R46
PO96
Issued
600 x P4.90 = P2,940
400 x P4.95 = P1,980
800 x P4.903 = P3,922.40
R52
310 x P4.903 = P1,519.93
490 x P4.903 = P2,402.47
RM24
(20) x P4.856 = P
510 x P4.901 = P2,499.59
97.12
* Answers may vary due to rounding. 10.
(a) Material AA BB CC DD
11.
Quantity 460 830 1,290 580
Cost P140 85 120 65
NRV P130 90 145 55
Valuation P 59,800 70,550 154,800 31,900 P317,050
(d) Materials AA BB CC DD
Cost P64,400 70,550 154,800 37,700 P327,450
NRV P59,800 74,700 187,050 31,900 P353,450
Since cost is lower, use P327,450 as the inventory valuation. 12.
(a)
Materials Group I AA BB Total Group II CC DD Total Valuation Summary Group I Group II Inventory Valuation
Quantity
Cost
NRV
Total Cost
Total NRV
460 830
P140 85
P130 90
P64,400 70,550 P134,950
P59,800 74,700 P134,500
1,290 580
120 65
145 55
P154,800 37,700 P192,500
P180,500 31,900 P218,950
Basis NRV Cost
Valuation P134,500 192,500 P327,000
4 13.
(b) Finished goods, May 1, 2010 Cost of goods manufactured Total cost of goods available Finished goods, May 31 Loss on inventory write-down Cost of goods sold
14.
P129,640 395,440 525,080 (142,840) 9,740 P391,980
(a) Finished goods, June 1 Cost goods manufactured Total cost of goods available Finished goods, June 30 Recovery from Inventory write-down Cost of goods sold
15.
P 290,540 805,820 1,096,360 ( 276,760) ( 10,720) P 808,880
(a) Cost NRV (P134,315 - P26,855) Inventory write-down
16.
P 110,492 107,460 P 3,032
(a) Balance of Allow. for Inventory Write-down Required balance of Allow account: Cost of inventory NVV Recovery
P
8,930
P
5,119 3,811
P296,369 291,250
5 Solutions to Problems Problem 4-1 FIFO DATE Jan. 1 6
REF. Bal. PO74
12
R18
14
PO83
17
R23
31
R19
UNITS 200
250
RECEIVED PRICE AMOUNT 40.50
41.00
UNITS
ISSUED PRICE
AMOUNT
8,100 150 75
40.00) 40.50)
125 75 40
40.50) 41.00) 41.00
9,037.50
10,250 8,137.50 1,640
UNITS 150 150 200
BALANCE PRICE AMOUNT 40.00 P 6,000.00 40.00) 40.50) 14,100.00
125 125 250
40.50 40.50) 41.00)
5,062.50 15,312.50
175 135
41.00 41.00
7,175.00 5.535.00
LIFO DATE Jan. 1
REF. Bal.
6 12
R18
14
PO83
17 31
UNITS
RECEIVED PRICE AMOUNT
UNITS
ISSUED PRICE
AMOUNT
200 25
40.50) 40.00)
9,100.00
R23
200
41.00
8,200.00
R19
40
41.00
1,640
250
41.00
10,250
UNITS 150 150 200 125 125 250 125 50 125 10
BALANCE PRICE AMOUNT 40.00 P 6,000.00 40.00 40.50 14,100.00 40.00 40.00) 41.00) 40.00) 41.00) 40.00) 41.00)
5,000.00 15,525.00 7,050.00 5,410
MOVING AVERAGE DATE Jan. 1 6
REF. Bal. PO74
UNITS 200
RECEIVED PRICE AMOUNT 40.50
UNITS
ISSUED PRICE
UNITS 150 350
9,067.50
125
40.30
5,037.50
375
40.80
15,282.50
8,100 225
12
R18
14
PO83
17
R23
200
40.80
8,160
175
40.80
7,122.50
31
R19
40
40.80
1,632.00
135
40.80
5,490.50
250
41.00
40.30
BALANCE PRICE AMOUNT 40.00 P 6,000.00 40.30 14,105.00
AMOUNT
10,250
6
Problem 4-2 LOWER OF COST OR NRV BY ITEM MATERIAL X-1 X-2 X-3 A-4 A-5 A-6 Inventory
QUANTITY 100 200 120 120 110 25
COST PER UNIT P100.00 150.00 160.00 50.00 75.00 60.00
NRV PER UNIT P110.00 130.00 150.00 45.00 72.50 63.00
VALUATION BASIS Cost NRV NRV NRV NRV Cost
valuation
LOWER OF COST OR NRV P10,000.00 26,000.00 18,000.00 5,400.00 7,975.00 1,500 P68,875.00
LOWER OF TOTAL COST OR TOTAL NRV MATERIAL X-1 X-2 X-3 A-4 A-5 A-6 Total Inventory
MATERIAL X-1 X-2 X-3 Total Group I A-4 A-5 A-6 Total Group II
QUANTITY 100 200 120 120 110 25
COST PER UNIT P100.00 150.00 160.00 50.00 75.00 60.00
NRV PER UNIT P110.00 130.00 150.00 45.00 72.50 63.00
TOTAL COST P10,000.00 30,000.00 19,200.00 6,000.00 8,250.00 1,500.00
TOTAL NRV P11,000.00 26,000.00 18,000.00 5,400.00 7,975.00 1,575.00
P74,950.00
P69,950.00 P69,950.00
Valuation LOWER OF TOTAL COST OR TOTAL NRV BY GROUP COST NRV PER TOTAL QUANTIT PER UNIT UNIT COST Y 100 P100.00 P110.00 P10,000.00 200 150.00 130.00 30,000.00 120 160.00 150.00 19,200.00 P59,200.00 120 50.00 45.00 6,000.00 110 75.00 72.50 8,250.00 25 60.00 63.00 1,500.00 P15,750.00
Summary of Inventory Valuation: MATERIAL Group I Group II Inventory valuation
BASIS Market Market
VALUATION P55,000.00 14,950.00 P69,950.00
TOTAL NRV P11,000.00 26,000.00 18,000.00 P55,000.00 5,400.00 7,975.00 1,575.00 P14,950.00
7 Problem 4-3 FIFO METHOD Material A-42 DATE May 1 2 3
REF. Bal. R032 PO507
RECEIVED UNITS PRICE AMOUNT 650
10.20
ISSUED PRICE
AMOUNT
110
9.50
1,045.00
UNITS
6,630
8
R036
150
9.50
1,425.00
31
R082
11 199
9.50) 10.20)
2,134.30
UNITS 271 161 161 650 11 650 451
BALANCE PRICE AMOUNT P9.50 P2,574.50 9.50 1,529.50 9.50) 10.20) 8,159.50 9.50) 10.20) 6,734.50 10.20
4,600.20
FIFO METHOD Materials B-18 DATE May 1 3 6
REF. Bal. PO507
RECEIVED UNITS PRICE AMOUNT 650
6.50
R046 PO061
31
R082
650
5.90
AMOUNT
83 92 80
7.00) 6.50) 6.50
1,179.00 520.00
382
6.50
2,483.00
4,225.00
R034
12 26
ISSUED PRICE
UNITS
3,835.00
UNITS 83 83 650 558 478 478 650 96 650
BALANCE PRICE AMOUNT P7.00 P 581.00 7.00) 6.50) 4,806.00 6.50 6.50 6.50) 5.90) 6.50) 5.90)
3,627.00 3,107.00 6,942.00 4,459.00
8 Problem 4-3 (continued)
MOVING AVERAGE METHOD Material A-42 RECEIVED UNITS PRICE AMOUNT
UNITS
ISSUED PRICE
AMOUNT
UNITS 271
110
9.50
1,045.00
161
9.50
1,529.50
811
10.06
8,159.50
661
10.06
6,650.50
451
10.06
4,537.90
DATE May 1
REF. Bal.
2
R032
3
PO507
8
R036
150
10.06
31
R082
210
10.06
650
10.20
6,630.00 1,509.00 2,112.60
BALANCE PRICE AMOUNT P9.50 P2,574.50
MOVING AVERAGE METHOD Materials B-18 DATE May 1
REF. Bal.
RECEIVED UNITS PRICE AMOUNT 650
ISSUED PRICE
3
PO507
6
R034
175
6.56
12
R046
80
26 31
PO061 R082
382
650
6.50
UNITS
5.90
AMOUNT
4,225.00
UNITS 83
BALANCE PRICE AMOUNT P7.00 P 581.00
733
6.56
4,806.00
1,148.00
558
6.56
3,658.00
6.56
524.80
478
6.56
3,133.20
6.18
2,360.80
1,128 746
6.18 6.18
6,968.20 4,607.40
3,835.00
9
Problem 4-4 Req 1:
Req. 2:
Req. 3:
Loss on inventory write-down Allowance for inventory write-down To record loss resulting from decline in Net Re3alizable Value of inventory.
2,910
Allowance for inventory write-down Recovery from inventory write-down To record recovery resulting from adjustment of allowance account.
41,925
Allowance for inventory write-down Recovery from inventory write-down To record recovery resulting from adjustment of allowance account.
61,980
2,910
41,925
61,980
Problem 4-5 Req. 1:
No entry is needed, cost is lower than market.
Req. 2:
Loss on inventory write-down Allowance for inventory write-down To record loss resulting from decline in net realizable value of inventory.
6,350
Allowance for inventory write-down Recovery from inventory write-down To record recovery resulting from adjustment of allowance account.
6,350
Req. 3:
Req. 4:
2008: Inventory, at cost, Lower of cost or NRV 2009: Inventory, at cost Less Allowance for inventory Write-down 2010: Inventory, at cost, lower of cost or NRV
6,350
6,350
P365,900 P348,105 6,350
P341,755 P337.740
Note: In 2010 the cost of inventory is higher than market. Therefore, the allowance of Inventory write-down is not needed. Inventory on the balance sheet will be shown at cost.
10 Problem 4-6 Goodson Printers Income Statement Year Ended January 31, 2010 Sales Sales returns and allowances Net sales Cost of goods sold: Finished goods inventory, Feb. 1 Cost of goods manufactured Cost goods available Finished goods inventory, Jan 31 Total Loss on inventory write-down Gross profit Operating expenses Selling expenses Administrative expenses Net income before provision for income tax Provision for income tax Net income after income tax
P729,370 48,211 681,159 P 47,910 422,280 470,190 49,620 420,570 9,682
430,252 250,907
96,357 60,061
156,418 94,489 28,347 P 66,141
Problem 4-7 FIFO METHOD DATE Mar. 1 5 9
REF. Bal R091 PO016
13
R094
22
PO023
29
R098
RECEIVED UNITS PRICE AMOUNT 600
600
140
145
ISSUED PRICE
AMOUNT
400
125
50,000
600 250
125) 140)
110,000
250
140
35,000
UNITS
84,000
UNITS 1,000 600 600 600 350 350 600 100
87,000
BALANCE PRICE AMOUNT 125 125,000 125 75,000 125) 140) 159,000 140 140) 145) 140) 145)
49,000 136,000 101,000
MOVING AVERAGE METHOD DATE Mar 1 5
REF. Bal R091
9
Po016
13
R094
22
PO023
31
R098
RECEIVED UNITS PRICE AMOUNT
UNITS 125
600
140
145
AMOUNT
125
50,000
84,000 850
600
ISSUED PRICE
132.50
UNITS 1,000 600 1,200
132.50
159,000
350
132.50
46,375
950
140.40
133,375
140.40
98,275
112,625
87,000 250
140.40
35,100
BALANCE PRICE AMOUNT 125.00 125,000 125.00 75,000
700
11 Problem 4-8
FIFO METHOD Material Number
Plywood B-84
DATE Nov. 1 1 3
REF. Bal R71 PO42
7
R36
12 21 26
R76 R76 PO47
31
R82
UNITS 650
650
Reorder Point 300 Reorder Quantity 650 RECEIVED PRICE AMOUNT 88
UNITS
ISSUED PRICE
AMOUNT
135
95
12,825
136 29 80 304
95) 88) 88 88
15,472 7,040 26,752
210
88
18,480
57,200
85
55,250
UNITS 271 136 136 650
BALANCE PRICE AMOUNT P95 P25,745 95 12,920 95) 88) 70,120
621 541 237 237 650 27 650
88 88 88 88) 85) 88) 85)
54,648 47,608 20,856 76,106 57,626
FIFO METHOD Materials Number DATE Nov. 1 3 4
Plastic R-36
REF. Bal PO42
UNITS 650
Reorder Point 300 Reorder Quantity 650 RECEIVED PRICE AMOUNT 76
R74 R76 PO47
31
R82
650
79
ISSUED PRICE
83 52 165 80
70) 76) 76) 76)
353 30
76) 79)
BALANCE PRICE AMOUNT 70 P5,810 70) 76) 55,210
AMOUNT
UNITS 83 83 650
9,762
598 433 353 353 650
76 76 76 76) 79)
45,448 32,908 26,828
620
79
48,980
49,400
R73
7 12 26
UNITS
6,080
51,350 29,198
78,178
12 Problem 4-8 (continued)
MOVING AVERAGE METHOD Material Number
Plywood B-84
UNITS
Reorder Point 300 Reorder Quantity 650 RECEIVED PRICE AMOUNT
UNITS
ISSUED PRICE
AMOUNT
UNITS 271
135
95
12,875
136
95
12,920
786
89.2
70,120
14,718
621
89.2
55,402
89.20
7,136
541
89.2
48,266
89.20
27,117
237
89.2
21,149
887
86.1
76,399
677
86.1
58,318
DATE Nov. 1
REF. Bal
1
R71
3
PO42
7
R74
165
89.20
12
R76
80
21
R79
304
26
PO47
31
R82
650
650
88
57,200
85
55,250 210
86.1
18,081
BALANCE PRICE AMOUNT P95 P25,745
MOVING AVERAGE METHOD Materials Number
Plastic R-36
Reorder Point 300 Reorder Quantity 650 RECEIVED PRICE AMOUNT
REF. Bal
UNITS
3
PO42
650
4
R73
135
75.32
7
R74
165
12
R76
80
26
PO47
31
R82
650
76
79
UNITS
ISSUED PRICE
DATE Nov. 1
AMOUNT
49,400
BALANCE PRICE AMOUNT 70 P5,810
733
75.32
55,210
10,168
598
75.32
45,042
75.32
12,438
433
75.32
32,604
75.32
6,026
353
75.32
26,578
1003
77.70
77,928
620
77.70
48,168
51,350 383
UNITS 83
77.70
29,759
13 Problem 4-9 (1)
December 31, 2009: Material AB
Units 10,000 5,000 15,000
XY 14,500 Inventory valuation (FIFO) (2)
P25
Total Cost P 600,000 250,000 P 850,000 362,500 P1,212,500
December 31, 2010: Material Units AB 16,000 XY 20,000 Inventory valuation (FIFO)
(3)
Unit Cost P60 50
Unit Cost P80 35
Total Cost P1,280,000 700,000 P1,980,000
Total Cost P 850,000 210,000 900,000 1,600,000 P2,750,000
December 31, 2010: Material AB Beginning inventory Purchases, Feb. Purchases, May Purchases, Oct. Total
Units 15,000 3,000 12,000 20,000 50,000
Unit Cost
Material XY Beginning inventory Purchases, Feb. Purchases, Dec. Total
Units 14,500 35,000 30,500 80,000
Unit Cost
P70 75 80
P30 35
Total Cost P 362,500 1,050,000 1,067,500 P2,480,000
Inventory valuation (Average Costing Method) Material AB: P2,750,000 / 50,000 X 16,000 = P 880,000 Material XY: P2,480,000 / 80,000 X 20,000 = 620,000 Total P1,500,000 (4)
Net income will decrease, since the ending inventory under the average method in 2010 is smaller than the ending inventory under the FIFO method.
14 Problem 4-10 Units available for sale Units sold (P2,800 / 100) Ending inventory FIFO:
42,000 28,000 14,000
September 5 25 Total
Units 2,000 12,000 14,000
Unit Cost P43.00 42.50
Total Cost P 86,000 510,000 P596,000
WEIGHTED AVERAGE: (P1,753,500 / 42,000)
14,000
41.75
584,500
AVERAGE P1,753,500 584,500 P1,169,000 (Sch. 1)
Available for sale Less ending inventory Cost of sales
FIFO P1,753,500 596,000 P1,157,500 (Sch. 2)
Problem 4-11 2008 Cost of sales – Average Understatement of ending inventory: 2008 2009 2010 Cost of sales – FIFO
2009 2010 P1,500,000 P2,000,000 P2,400,000 (150,000)
150,000 (200,000) P1,950,000
200,000 (270,000) P2,330,000
2008 P3,000,000 1,350,000 1,650,000 800,000 P 850,000
2009 P4,000,000 1,950,000 2,050,000 900,000 P1,150,000
2010 P4,800,000 2,330,000 2,470,000 1,000,000 P1,470,000
P 700,000
P1,100,000
P1,400,000
150,000
(150,000) 200,000
P1,350,000
Shang Company Income Statement – FIFO Years Ended December 31, 2008, 2009 and 2010 Sales Cost of sales – FIFO Gross profit Operating expenses Net income Proof: Net income – AVERAGE Understatement of ending inventory: 2008 2009 2010 Net income – FIFO
P 850,000
P1,150,000
(200,000) 270,000 P1,470,000
15 Problem 4-12
Inventory Units Unit Cost Materials: R-10 1,000 P110 S-11 2,000 250 T-12 3,000 300 Goods in Process: X-20 4,000 500 Y-21 5,000 650 Finished Goods: A-30 2,000 800 B-31 2,000 730 Ending inventory at lower of cost or NRV
NRV per unit
Valuation at Lower of Cost or NRV
P100 260 330
P 100,000 500,000 900,000
480 620
1,920,000 3,100,000
790 780
1,580,000 1,460,000 P9,560,000
Problem 4-13
Materials Units Unit Cost AA 1,000 P120 BB 1,500 110 CC 1,200 150 DD 1,800 140 EE 1,700 130 Ending inventory at lower of cost or NRV
NRV per Unit P150 120 140 160 160
Valuation at Lower of Cost or NRV P120,000 165,000 168,000 252,000 221,000 P926,000
Problem 4-14
Product A-1 B-2 C-3 D-4
Units 700 495 255 450
Unit Cost P700 475 255 450
NRV per unit P650 745 250 740
Valuation at Lower of Cost or NRV P650 475 250 450
CHAPTER 4 Multiple Choices – Computational 1. 2. 3. 4. 5.
b b b b b
6. 7. 8. 9. 10.
b c b a A
Multiple Choices – Computational 1.
(a) Cost of Units x Cost Materials Issued 15 x P20 = P300 10 x P15 = 150 (5 x P20) + (10 x P18) = 280 P730 Ending inventory: 5 (from 5/24 purchase) x P18 = P90 Date of Issue 5/15 5/19 5/30
2.
Purchase Lot 5/5 BI 5/5 & 5/24
(a) (10 x P15) + (20 x P20) + (15 x P18) 45
=
P18.222
Cost of materials issued: 40 x P18.222 = P729.88 Ending inventory: 5 x P18.222 = P91.11 3.
(a) Date BI 5/5 5/24
4.
Units 10 20 10 40
Unit Cost P15 20 18
(c) Purchases
Date BI 5/5 5/15 5/19 5/24 5/30 (a) (b)
Cost of Materials Issued P150 400 180 P730
Units 10 20 15 -
Unit Cost P15 20 18 -
Units 15 10 15
Issued Unit Cost P18.333 18.333 18.084
(10 x P15) + (20 x P20) / 30 = P18.333 (5 x P18.333) + (15 x P18) / 20 = P18.084
Total Cost P275.00 183.33 271.26
Units 10 30 15 5 20 5
Balance Unit Cost P15.000 18.333(a) 18.333 18.333 18.085(b) 18.084
Total Cost P150.00 550.00 275.00 91.67 361.68 90.42
2 5.
(a) Purchases
Date BI 5/5 5/15 5/19 5/24 5/30
Units 10 20 15 -
(a) (b) (c) (d)
(10 x P15) (10 x P15) (5 x P20) (5 x P15)
6.
(d)
Date 1/1 1/6 1/7 1/26 1/31
Unit Cost P15 20 18 -
Units 1,500 3,400 -
+ + + +
Units 15 10 15
(20 x P20) (5 x P20) (5 x P15) (15 x P18)
Purchases Price 10.300 10.750 -
= = = =
Issued Unit Cost P20 (c) 18
Amount 15,450 36,550 -
Issued Price 10.000 10.500
Units 1,800 3,200
(P19,550 + P15,450) / (2,000 + 1,500) = (P17,000 + P36,550) / (1,700 + 3,400) =
7.
(c) P19,550 + P15,450 + P36,550 6,900
Amount 18,000 33,600
Units 2,000 3,500 1,700 5,100 1,900
Balance Price 9.775 10.000(a) 10.000 10.500(b) 10.500
Amount 19,550 35,000 17,000 53,550 19,950
P10.000 P10.500
x 1,900 = P19,702
Issued
600 x P4.90 = P2,940
R46
175 x P4.80 = P 840
R49
225 x P4.80 = P1,080
R50
80 x P4.80 = P 384 200 x P4.90 = P 980
PO96
Total P150 550 250 75 345 P75
(a) Received
Balance PO30
Units 10 30 15 5 20 5
Balance Unit Cost P15 (a) (b) 15 (d) 15
P550 P250 P175 P345
(a) (b)
8.
Total Cost P300 175 270
400 x P4.95 = P1,980
R52
310 x P4.90 = P1,519
RM24
(20) x P4.90 = (P98)
480 480 600 305 600 80 600
x x x x x x x
Balance P4.80 = P2,304 P4.80 = P2,304 P4.90 = P2,940 P4.80 = P1,464 P4.90 = P2,940 P4.80 = P 384 P4.90 = P2,940
400 400 400 90 400 110 400
x x x x x x x
P4.90 = P4.90 = P4.95 = P4.90 = P4.95 = P4.90 ) P4.95 )=
P1,960 P1,960 P1,980 P 441 P1,980 P2,519
3 9.
(a) Received
175 x P4.856 = P 849.80
Balance * 480 x P4.80 = P2,304.00 1,080 x P4.856 = P5,244.48 905 x P4.856 = P4,394.68
R49
225 x P4.856 = P1,092.60
680 x P4.856 = P3,302.08
R50
280 x P4.856 = P1,359.68
400 x P4.856 = P1,942.40
Balance PO30 R46
PO96
Issued
600 x P4.90 = P2,940
400 x P4.95 = P1,980
800 x P4.903 = P3,922.40
R52
310 x P4.903 = P1,519.93
490 x P4.903 = P2,402.47
RM24
(20) x P4.856 = P
510 x P4.901 = P2,499.59
97.12
* Answers may vary due to rounding. 10.
(a) Material AA BB CC DD
11.
Quantity 460 830 1,290 580
Cost P140 85 120 65
NRV P130 90 145 55
Valuation P 59,800 70,550 154,800 31,900 P317,050
(d) Materials AA BB CC DD
Cost P64,400 70,550 154,800 37,700 P327,450
NRV P59,800 74,700 187,050 31,900 P353,450
Since cost is lower, use P327,450 as the inventory valuation. 12.
(a)
Materials Group I AA BB Total Group II CC DD Total Valuation Summary Group I Group II Inventory Valuation
Quantity
Cost
NRV
Total Cost
Total NRV
460 830
P140 85
P130 90
P64,400 70,550 P134,950
P59,800 74,700 P134,500
1,290 580
120 65
145 55
P154,800 37,700 P192,500
P180,500 31,900 P218,950
Basis NRV Cost
Valuation P134,500 192,500 P327,000
4 13.
(b) Finished goods, May 1, 2010 Cost of goods manufactured Total cost of goods available Finished goods, May 31 Loss on inventory write-down Cost of goods sold
14.
P129,640 395,440 525,080 (142,840) 9,740 P391,980
(a) Finished goods, June 1 Cost goods manufactured Total cost of goods available Finished goods, June 30 Recovery from Inventory write-down Cost of goods sold
15.
P 290,540 805,820 1,096,360 ( 276,760) ( 10,720) P 808,880
(a) Cost NRV (P134,315 - P26,855) Inventory write-down
16.
P 110,492 107,460 P 3,032
(a) Balance of Allow. for Inventory Write-down Required balance of Allow account: Cost of inventory NVV Recovery
P
8,930
P
5,119 3,811
P296,369 291,250
5 Solutions to Problems Problem 4-1 FIFO DATE Jan. 1 6
REF. Bal. PO74
12
R18
14
PO83
17
R23
31
R19
UNITS 200
250
RECEIVED PRICE AMOUNT 40.50
41.00
UNITS
ISSUED PRICE
AMOUNT
8,100 150 75
40.00) 40.50)
125 75 40
40.50) 41.00) 41.00
9,037.50
10,250 8,137.50 1,640
UNITS 150 150 200
BALANCE PRICE AMOUNT 40.00 P 6,000.00 40.00) 40.50) 14,100.00
125 125 250
40.50 40.50) 41.00)
5,062.50 15,312.50
175 135
41.00 41.00
7,175.00 5.535.00
LIFO DATE Jan. 1
REF. Bal.
6 12
R18
14
PO83
17 31
UNITS
RECEIVED PRICE AMOUNT
UNITS
ISSUED PRICE
AMOUNT
200 25
40.50) 40.00)
9,100.00
R23
200
41.00
8,200.00
R19
40
41.00
1,640
250
41.00
10,250
UNITS 150 150 200 125 125 250 125 50 125 10
BALANCE PRICE AMOUNT 40.00 P 6,000.00 40.00 40.50 14,100.00 40.00 40.00) 41.00) 40.00) 41.00) 40.00) 41.00)
5,000.00 15,525.00 7,050.00 5,410
MOVING AVERAGE DATE Jan. 1 6
REF. Bal. PO74
UNITS 200
RECEIVED PRICE AMOUNT 40.50
UNITS
ISSUED PRICE
UNITS 150 350
9,067.50
125
40.30
5,037.50
375
40.80
15,282.50
8,100 225
12
R18
14
PO83
17
R23
200
40.80
8,160
175
40.80
7,122.50
31
R19
40
40.80
1,632.00
135
40.80
5,490.50
250
41.00
40.30
BALANCE PRICE AMOUNT 40.00 P 6,000.00 40.30 14,105.00
AMOUNT
10,250
6
Problem 4-2 LOWER OF COST OR NRV BY ITEM MATERIAL X-1 X-2 X-3 A-4 A-5 A-6 Inventory
QUANTITY 100 200 120 120 110 25
COST PER UNIT P100.00 150.00 160.00 50.00 75.00 60.00
NRV PER UNIT P110.00 130.00 150.00 45.00 72.50 63.00
VALUATION BASIS Cost NRV NRV NRV NRV Cost
valuation
LOWER OF COST OR NRV P10,000.00 26,000.00 18,000.00 5,400.00 7,975.00 1,500 P68,875.00
LOWER OF TOTAL COST OR TOTAL NRV MATERIAL X-1 X-2 X-3 A-4 A-5 A-6 Total Inventory
MATERIAL X-1 X-2 X-3 Total Group I A-4 A-5 A-6 Total Group II
QUANTITY 100 200 120 120 110 25
COST PER UNIT P100.00 150.00 160.00 50.00 75.00 60.00
NRV PER UNIT P110.00 130.00 150.00 45.00 72.50 63.00
TOTAL COST P10,000.00 30,000.00 19,200.00 6,000.00 8,250.00 1,500.00
TOTAL NRV P11,000.00 26,000.00 18,000.00 5,400.00 7,975.00 1,575.00
P74,950.00
P69,950.00 P69,950.00
Valuation LOWER OF TOTAL COST OR TOTAL NRV BY GROUP COST NRV PER TOTAL QUANTIT PER UNIT UNIT COST Y 100 P100.00 P110.00 P10,000.00 200 150.00 130.00 30,000.00 120 160.00 150.00 19,200.00 P59,200.00 120 50.00 45.00 6,000.00 110 75.00 72.50 8,250.00 25 60.00 63.00 1,500.00 P15,750.00
Summary of Inventory Valuation: MATERIAL Group I Group II Inventory valuation
BASIS Market Market
VALUATION P55,000.00 14,950.00 P69,950.00
TOTAL NRV P11,000.00 26,000.00 18,000.00 P55,000.00 5,400.00 7,975.00 1,575.00 P14,950.00
7 Problem 4-3 FIFO METHOD Material A-42 DATE May 1 2 3
REF. Bal. R032 PO507
RECEIVED UNITS PRICE AMOUNT 650
10.20
ISSUED PRICE
AMOUNT
110
9.50
1,045.00
UNITS
6,630
8
R036
150
9.50
1,425.00
31
R082
11 199
9.50) 10.20)
2,134.30
UNITS 271 161 161 650 11 650 451
BALANCE PRICE AMOUNT P9.50 P2,574.50 9.50 1,529.50 9.50) 10.20) 8,159.50 9.50) 10.20) 6,734.50 10.20
4,600.20
FIFO METHOD Materials B-18 DATE May 1 3 6
REF. Bal. PO507
RECEIVED UNITS PRICE AMOUNT 650
6.50
R046 PO061
31
R082
650
5.90
AMOUNT
83 92 80
7.00) 6.50) 6.50
1,179.00 520.00
382
6.50
2,483.00
4,225.00
R034
12 26
ISSUED PRICE
UNITS
3,835.00
UNITS 83 83 650 558 478 478 650 96 650
BALANCE PRICE AMOUNT P7.00 P 581.00 7.00) 6.50) 4,806.00 6.50 6.50 6.50) 5.90) 6.50) 5.90)
3,627.00 3,107.00 6,942.00 4,459.00
8 Problem 4-3 (continued)
MOVING AVERAGE METHOD Material A-42 RECEIVED UNITS PRICE AMOUNT
UNITS
ISSUED PRICE
AMOUNT
UNITS 271
110
9.50
1,045.00
161
9.50
1,529.50
811
10.06
8,159.50
661
10.06
6,650.50
451
10.06
4,537.90
DATE May 1
REF. Bal.
2
R032
3
PO507
8
R036
150
10.06
31
R082
210
10.06
650
10.20
6,630.00 1,509.00 2,112.60
BALANCE PRICE AMOUNT P9.50 P2,574.50
MOVING AVERAGE METHOD Materials B-18 DATE May 1
REF. Bal.
RECEIVED UNITS PRICE AMOUNT 650
ISSUED PRICE
3
PO507
6
R034
175
6.56
12
R046
80
26 31
PO061 R082
382
650
6.50
UNITS
5.90
AMOUNT
4,225.00
UNITS 83
BALANCE PRICE AMOUNT P7.00 P 581.00
733
6.56
4,806.00
1,148.00
558
6.56
3,658.00
6.56
524.80
478
6.56
3,133.20
6.18
2,360.80
1,128 746
6.18 6.18
6,968.20 4,607.40
3,835.00
9
Problem 4-4 Req 1:
Req. 2:
Req. 3:
Loss on inventory write-down Allowance for inventory write-down To record loss resulting from decline in Net Re3alizable Value of inventory.
2,910
Allowance for inventory write-down Recovery from inventory write-down To record recovery resulting from adjustment of allowance account.
41,925
Allowance for inventory write-down Recovery from inventory write-down To record recovery resulting from adjustment of allowance account.
61,980
2,910
41,925
61,980
Problem 4-5 Req. 1:
No entry is needed, cost is lower than market.
Req. 2:
Loss on inventory write-down Allowance for inventory write-down To record loss resulting from decline in net realizable value of inventory.
6,350
Allowance for inventory write-down Recovery from inventory write-down To record recovery resulting from adjustment of allowance account.
6,350
Req. 3:
Req. 4:
2008: Inventory, at cost, Lower of cost or NRV 2009: Inventory, at cost Less Allowance for inventory Write-down 2010: Inventory, at cost, lower of cost or NRV
6,350
6,350
P365,900 P348,105 6,350
P341,755 P337.740
Note: In 2010 the cost of inventory is higher than market. Therefore, the allowance of Inventory write-down is not needed. Inventory on the balance sheet will be shown at cost.
10 Problem 4-6 Goodson Printers Income Statement Year Ended January 31, 2010 Sales Sales returns and allowances Net sales Cost of goods sold: Finished goods inventory, Feb. 1 Cost of goods manufactured Cost goods available Finished goods inventory, Jan 31 Total Loss on inventory write-down Gross profit Operating expenses Selling expenses Administrative expenses Net income before provision for income tax Provision for income tax Net income after income tax
P729,370 48,211 681,159 P 47,910 422,280 470,190 49,620 420,570 9,682
430,252 250,907
96,357 60,061
156,418 94,489 28,347 P 66,141
Problem 4-7 FIFO METHOD DATE Mar. 1 5 9
REF. Bal R091 PO016
13
R094
22
PO023
29
R098
RECEIVED UNITS PRICE AMOUNT 600
600
140
145
ISSUED PRICE
AMOUNT
400
125
50,000
600 250
125) 140)
110,000
250
140
35,000
UNITS
84,000
UNITS 1,000 600 600 600 350 350 600 100
87,000
BALANCE PRICE AMOUNT 125 125,000 125 75,000 125) 140) 159,000 140 140) 145) 140) 145)
49,000 136,000 101,000
MOVING AVERAGE METHOD DATE Mar 1 5
REF. Bal R091
9
Po016
13
R094
22
PO023
31
R098
RECEIVED UNITS PRICE AMOUNT
UNITS 125
600
140
145
AMOUNT
125
50,000
84,000 850
600
ISSUED PRICE
132.50
UNITS 1,000 600 1,200
132.50
159,000
350
132.50
46,375
950
140.40
133,375
140.40
98,275
112,625
87,000 250
140.40
35,100
BALANCE PRICE AMOUNT 125.00 125,000 125.00 75,000
700
11 Problem 4-8
FIFO METHOD Material Number
Plywood B-84
DATE Nov. 1 1 3
REF. Bal R71 PO42
7
R36
12 21 26
R76 R76 PO47
31
R82
UNITS 650
650
Reorder Point 300 Reorder Quantity 650 RECEIVED PRICE AMOUNT 88
UNITS
ISSUED PRICE
AMOUNT
135
95
12,825
136 29 80 304
95) 88) 88 88
15,472 7,040 26,752
210
88
18,480
57,200
85
55,250
UNITS 271 136 136 650
BALANCE PRICE AMOUNT P95 P25,745 95 12,920 95) 88) 70,120
621 541 237 237 650 27 650
88 88 88 88) 85) 88) 85)
54,648 47,608 20,856 76,106 57,626
FIFO METHOD Materials Number DATE Nov. 1 3 4
Plastic R-36
REF. Bal PO42
UNITS 650
Reorder Point 300 Reorder Quantity 650 RECEIVED PRICE AMOUNT 76
R74 R76 PO47
31
R82
650
79
ISSUED PRICE
83 52 165 80
70) 76) 76) 76)
353 30
76) 79)
BALANCE PRICE AMOUNT 70 P5,810 70) 76) 55,210
AMOUNT
UNITS 83 83 650
9,762
598 433 353 353 650
76 76 76 76) 79)
45,448 32,908 26,828
620
79
48,980
49,400
R73
7 12 26
UNITS
6,080
51,350 29,198
78,178
12 Problem 4-8 (continued)
MOVING AVERAGE METHOD Material Number
Plywood B-84
UNITS
Reorder Point 300 Reorder Quantity 650 RECEIVED PRICE AMOUNT
UNITS
ISSUED PRICE
AMOUNT
UNITS 271
135
95
12,875
136
95
12,920
786
89.2
70,120
14,718
621
89.2
55,402
89.20
7,136
541
89.2
48,266
89.20
27,117
237
89.2
21,149
887
86.1
76,399
677
86.1
58,318
DATE Nov. 1
REF. Bal
1
R71
3
PO42
7
R74
165
89.20
12
R76
80
21
R79
304
26
PO47
31
R82
650
650
88
57,200
85
55,250 210
86.1
18,081
BALANCE PRICE AMOUNT P95 P25,745
MOVING AVERAGE METHOD Materials Number
Plastic R-36
Reorder Point 300 Reorder Quantity 650 RECEIVED PRICE AMOUNT
REF. Bal
UNITS
3
PO42
650
4
R73
135
75.32
7
R74
165
12
R76
80
26
PO47
31
R82
650
76
79
UNITS
ISSUED PRICE
DATE Nov. 1
AMOUNT
49,400
BALANCE PRICE AMOUNT 70 P5,810
733
75.32
55,210
10,168
598
75.32
45,042
75.32
12,438
433
75.32
32,604
75.32
6,026
353
75.32
26,578
1003
77.70
77,928
620
77.70
48,168
51,350 383
UNITS 83
77.70
29,759
13 Problem 4-9 (1)
December 31, 2009: Material AB
Units 10,000 5,000 15,000
XY 14,500 Inventory valuation (FIFO) (2)
P25
Total Cost P 600,000 250,000 P 850,000 362,500 P1,212,500
December 31, 2010: Material Units AB 16,000 XY 20,000 Inventory valuation (FIFO)
(3)
Unit Cost P60 50
Unit Cost P80 35
Total Cost P1,280,000 700,000 P1,980,000
Total Cost P 850,000 210,000 900,000 1,600,000 P2,750,000
December 31, 2010: Material AB Beginning inventory Purchases, Feb. Purchases, May Purchases, Oct. Total
Units 15,000 3,000 12,000 20,000 50,000
Unit Cost
Material XY Beginning inventory Purchases, Feb. Purchases, Dec. Total
Units 14,500 35,000 30,500 80,000
Unit Cost
P70 75 80
P30 35
Total Cost P 362,500 1,050,000 1,067,500 P2,480,000
Inventory valuation (Average Costing Method) Material AB: P2,750,000 / 50,000 X 16,000 = P 880,000 Material XY: P2,480,000 / 80,000 X 20,000 = 620,000 Total P1,500,000 (4)
Net income will decrease, since the ending inventory under the average method in 2010 is smaller than the ending inventory under the FIFO method.
14 Problem 4-10 Units available for sale Units sold (P2,800 / 100) Ending inventory FIFO:
42,000 28,000 14,000
September 5 25 Total
Units 2,000 12,000 14,000
Unit Cost P43.00 42.50
Total Cost P 86,000 510,000 P596,000
WEIGHTED AVERAGE: (P1,753,500 / 42,000)
14,000
41.75
584,500
AVERAGE P1,753,500 584,500 P1,169,000 (Sch. 1)
Available for sale Less ending inventory Cost of sales
FIFO P1,753,500 596,000 P1,157,500 (Sch. 2)
Problem 4-11 2008 Cost of sales – Average Understatement of ending inventory: 2008 2009 2010 Cost of sales – FIFO
2009 2010 P1,500,000 P2,000,000 P2,400,000 (150,000)
150,000 (200,000) P1,950,000
200,000 (270,000) P2,330,000
2008 P3,000,000 1,350,000 1,650,000 800,000 P 850,000
2009 P4,000,000 1,950,000 2,050,000 900,000 P1,150,000
2010 P4,800,000 2,330,000 2,470,000 1,000,000 P1,470,000
P 700,000
P1,100,000
P1,400,000
150,000
(150,000) 200,000
P1,350,000
Shang Company Income Statement – FIFO Years Ended December 31, 2008, 2009 and 2010 Sales Cost of sales – FIFO Gross profit Operating expenses Net income Proof: Net income – AVERAGE Understatement of ending inventory: 2008 2009 2010 Net income – FIFO
P 850,000
P1,150,000
(200,000) 270,000 P1,470,000
15 Problem 4-12
Inventory Units Unit Cost Materials: R-10 1,000 P110 S-11 2,000 250 T-12 3,000 300 Goods in Process: X-20 4,000 500 Y-21 5,000 650 Finished Goods: A-30 2,000 800 B-31 2,000 730 Ending inventory at lower of cost or NRV
NRV per unit
Valuation at Lower of Cost or NRV
P100 260 330
P 100,000 500,000 900,000
480 620
1,920,000 3,100,000
790 780
1,580,000 1,460,000 P9,560,000
Problem 4-13
Materials Units Unit Cost AA 1,000 P120 BB 1,500 110 CC 1,200 150 DD 1,800 140 EE 1,700 130 Ending inventory at lower of cost or NRV
NRV per Unit P150 120 140 160 160
Valuation at Lower of Cost or NRV P120,000 165,000 168,000 252,000 221,000 P926,000
Problem 4-14
Product A-1 B-2 C-3 D-4
Units 700 495 255 450
Unit Cost P700 475 255 450
NRV per unit P650 745 250 740
Valuation at Lower of Cost or NRV P650 475 250 450
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