A Lectures
INVENTORY
Given the following types of arrangement, indicate the party who must include the inventory in its books:
1. FOB shipping point _______________
2. FOB destination _______________
3. Consigned goods _______________
4. Installment sale _______________
5. Inventory financing _______________
6. Pledge of inventory _______________
7. Loan of inventory _______________
8. Sale with unusual right of return _______________
9. Sale on trial (or approval) _______________
10. Bill and hold arrangement _______________
11. Lay away sale _______________
Given the following shipping terms below, indicate whether the buyer or the seller shoulders the freight costs:
1. Freight collect _______________
2. Freight prepaid _______________
3. FAS (free alongside) _______________
4. Ex-ship _______________
5. CIF (cost, insurance and freight) _______________
6. CF (cost and freight) _______________
1. On December 31, 2023, Tara Company reported ending inventory at P2,800,000 based on physical count. Following are the items that were
not included in the said amount:
Goods located in the entity’s warehouse that are on consignment from another entity 285,000
Goods sold by the entity and shipped FOB Destination was in transit on December 31, 2023,
and received by the customer on January 2, 2024. 310,000
Goods purchased by the entity and shipped FOB Seller were in transit on December 31, 2023,
and received by the entity on January 2, 2024. 440,000
Goods sold by the entity and shipped FOB Shipping Point were in transit on December 31, 2023,
and received by the customer on January 2, 2024 550,000
What is the correct amount of inventory on December 31, 2023?
a. 2,810,000 c. 3,550,000
b. 3,535,000 d. 2,800,000
2. A physical count on December 31, 2024, revealed that Tikka Company had inventory with a cost of 5,000,000. The following items were
excluded from this account:
Goods purchased in transit by the December 31,2024, “Ex-ship”, costing 25,000.
Goods costing 200,000 was shipped by Tikka “Ex-ship” to a customer on December 31,2024. The customer received the goods on
January 3,2025.
Goods purchased in transit by December 31,2024, “Cost, Insurance Freight”, costing 37,500.
Goods costing 350,000 was shipped by Tikka “CIF” on December 30, 2024 and received by the customer on January 10, 2025.
Merchandise costing 250,000 was shipped by Tikka “Free alongside” to a customer on December 29, 2024. The customer received
the goods on January 6, 2025.
Goods purchased in transit by December 31, 2024, “Free Alongside”, costing 50,000.
What is the correct amount of inventory on December 31, 2024?
a. 5, 287, 500 c. 5, 237,000
b. 5,278,500 d. 5,200,500
3. Use the following information in answering the next TWO (2) questions:
Edward Company provided the following inventory data from the month of April 2023:
A Lectures
UNITS UNIT COST
April Balance 600 520
10 Purchase 1,600 550
28 Purchase 450 580
The company applied the periodic inventory system and based on the additional information given, the ending inventory for the month was
850 units.
I. Compute for the cost of ending inventory under FIFO method.
a. 481,000 c. 467,500
b. 480, 250 d. 493,000
II. Compute for the cost of goods sold under weighted average method.
a. 984,019 c. 980,910
b. 986,940 d. 978,942
4. KRIS BRAWN COMPANY used the perpetual system provided the following data relating to an inventory item.
Units Unit cost Total
Mar. 1 Beginning 6,000 430 2,580,000
12 Purchase 4,500 500 2,250,000
14 Sale 7,000
15 Sale return 1,000
29 Purchase 16,000 300 4,800,000
30 Purchase return 2,000 300 600,000
What is the moving average unit cost on March 31?
a. 340. 35 c. 345. 78
b. 338. 92 d. 339. 43
5. Company X purchased a plot of ground for P18,000,000. The entity also paid an independent appraiser for the land the amount of P500,000.
The land was developed as residential lots at a total cost of P41,500,000. The lots were classified as follows:
No. of lots Sales price per lot
Group 1 20 1,000,000
Group 2 40 750,000
Group 3 100 500,000
Compute the total cost of each lot classification and the profit of Group 1.
6. The Jag Corporation applies the lower of cost or net realizable value (NRV) inventory. Data regarding the items in work-in-process inventory
are shown below:
Shorts Pants
Historical cost P56,640 P90,000
Selling price 108,800 110,000
Estimated cost to complete 14,400 20,400
Replacement cost 50,400 95,400
Normal profit margin as percentage
of selling price 25% 10%
The work-in-process inventory shall be reported at what amount?
a. 146,240 c. 184,000
b. 146,640 d. 184,400
7. JILLMAN COMPANY had the following inventory at year-end:
Cost NRV
Boxing gloves P2,700,000 P3,700,000
Boxing shoes 1,800,000 1,500,000
Wrist band 500,000 660,000
Boxing apparel 870,000 920,000
What amount should be reported as inventory at year-end?
a. 5,070,000 c. 4,700,000
b. 7,080,000 d. 5,570,000