Colegio de San Juan de Letran

Intramuros, Manila
COLLEGE OF BUSINESS ADMINISTRATION & ACCOUNTANCY
Department of Accountancy
Quiz No. 2 – Inventory – Problem Solving
1st Semester, Academic Year 2020 – 2021
ACC105: Intermediate Accounting, P-1

1. On December 2, 2019, Choco Manufacturing Company purchased goods with a cash price of P1,600,000. Some of
the costs incurred in connection with the acquisition of the goods were as follows: Import duties, P160,000;
transportation costs, P80,000; and handling costs, P40,000. These goods were received on December 31, 2019.
In the December 31, 2019 balance sheet, at what amount should these goods be included in inventory?

2. Prince Corp. uses the periodic inventory method. On March 1, it purchased P30,000 of inventory, terms 2/10, n/30.
On March 3, Prince returned goods that cost P3,000. On March 9, Prince paid the supplier.
On March 9, what will be the entry to record the settlement? (assume gross method)

3. Arriba Company purchased merchandise on account from Knights Company. The merchandise has list price of
P600,000 subject to trade discounts of 10%, 5%,10%. Credit terms is 5/10; n/30. Refer to the following independent
assumptions:
 Using the gross method, what will be the entry to record the settlement assuming payment was made beyond
the discount period. (Periodic Inventory System is used)
 Using the net method, what will be the entry to record the settlement assuming payment was made beyond
the discount period. (Periodic Inventory System is used)
 Using the gross method, what will be the entry to record the settlement assuming payment was made beyond
the discount period. (Perpetual Inventory System is used)
 Using the net method, what will be the entry to record the settlement assuming payment was made beyond
the discount period. (Perpetual Inventory System is used)

4. The Burger Company’s physical inventory on December 31, 2019 showed that merchandise with a cost of P364,000
was on hand at that date. Excluded from this amount are the following items:
 Merchandise costing P30,000 held by Burger on consignment.
 Merchandise costing P45,000 shipped FOB shipping point to a customer on December 29, 2019. The goods are
expected to be received by the customer on January 4, 2018.
 Merchandise costing P62,000 shipped FOB destination to a customer on December 31, 2019. The goods were
expected to be received by the customer on January 6, 2018.
 Merchandise costing P78,000 shipped by a vendor FOB destination on December 30, 2019 and received by
Burger on January 5, 2018.
 Merchandise costing P54,000 shipped by a vendor FOB seller on December 31, 2019 and received by Burger
on January 3, 2018.

What is the correct inventory that should appear in Burger’s statement of financial position at December 31,
2019?

5. The following data were taken from the accounting records of Pizza Lamps, Inc
Balance at January 1, 2019 5,000 lamps @ P30
Purchases: January 8, 2019 1,200 lamps @ P32
January 20, 2019 800 lamps @ P34
Sales: January 6, 2019 3,300 lamps
January 14, 2019 2,200 lamps

If the company uses the periodic inventory system, compute for the following:
a. Ending Inventory using FIFO
b. Ending Inventory using Average
c. Cost of sales using FIFO
d. Cost of sales using Average

6. Using the data in #5, assume that the company uses the perpetual inventory system, compute for the following:
 Ending Inventory using Average
 Cost of sales using Average

1st Semester A.Y. 2020-2021 Quiz 2: Intermediate Accounting 1 JPB

 7. The following data are extracted from the records of an entity relating to an inventory item.
Quantity Unit Cost Total Cost
Jan. 1 Beginning balance 5,000 P200 P1,000,000
10 Purchase 5,000 250 1,250,000
15 Sale 7,000
16 Sales returns 1,000
30 Purchase 16,000 150 2,400,000
31 Purchase returns 2,000 150 300,000

Under the perpetual inventory system, what is the moving average unit cost at January 31?

8. Milk Tea Co. has the following data related to an item of inventory:
Inventory, March 1 100 units @ P4.20
Purchase, March 7 350 units @ P4.40
Purchase, March 16 70 units @ P4.50
Inventory, March 31 130 units

The value assigned to cost of goods sold if Milk Tea uses FIFO is:

9. Coke Co. recorded the following data pertaining to raw material X during January 2019:
Units
Date Received Cost Issued On Hand
1/1/2019 Inventory P8.00 3,200
1/11/2019 Issue 1,600 1,600
1/22/2019 Purchase 4,000 P9.40 5,600

The moving-average unit cost of X inventory at January 31, 2019 is:

10. Hotdog Co. determine its December 31, 2019, inventory on a FIFO basis to be P400,000. Information pertaining to
that inventory follows:
Estimated selling price P816,000
Estimated cost to dispose 40,000
Normal profit margin 120,000
Current replacement cost 720,000

Hotdog records losses that results from applying the lower of cost or NRV. At December 31, 2019, what should be
the net carrying value of Hotdog’ inventory?

11. Waffle Company sells a variety of items to its customers. At December 31, the balance of Waffle’s ending inventory
account was P5,000,000 and the allowance for inventory write down account before any adjustment was P200,000.
Relevant information about the inventories and the breakdown of inventory cost and market data at December 31
follows:

Item Cost Replacement Cost Sales Price Net Realizable Value Normal Profit
A P1,000,000 P1,100,000 P1,450,000 P 700,000 P100,000
B 1,500,000 1,200,000 1,750,000 1,600,000 200,000
C 1,700,000 1,300,000 2,000,000 1,450,000 250,000
D 800,000 1,000,000 1,300,000 950,000 250,000
Total P5,000,000 P4,600,000 P6,500,000 P4,700,000 P800,000

How much is the loss on inventory write down?

How much inventory should be presented in the year-end financial statement?

12. During 2019, Salad Company signed a non-cancelable contract with Vegetable Milling Company to purchase 1,000,
50-kilos sacks of rice at P20 per kilo with delivery to be made on April 1, 2020. On December 31, 2019, the price
of rice had fallen to P18 per kilo. On April 1, 2020, the price per kilo of rice further decreased to P17.50.

In Salad’s Dec. 31, 2019 profit and loss, how much is reported as loss on purchase commitments?
What is the amount of loss on purchase commitments recognized upon delivery of the 1,000 sacks on April 1,
2020?

1st Semester A.Y. 2020-2021 Quiz 2: Intermediate Accounting 1 JPB

 13. Presented below is a list of items that may or may not reported as inventory in SUITS Company’s December 31
statement of financial position.

Goods out on consignment at another company’s store P800,000

Goods sold on installment basis 100,000
Goods purchased still in transit on December 31 on terms CIF 120,000
Goods purchased still in transit on December 31on terms Ex-ship 200,000
Goods sold to another company, for which our company has signed an agreement to
repurchase at a set price that covers all costs related to the inventory 300,000
Goods sold where large returns are predictable 280,000
Goods sold f.o.b. Seller that are in transit as of December 31 120,000
Freight charges on goods purchased 80,000
Factory labor costs incurred on goods still not completely processed 50,000
Interest cost incurred for inventories that are routinely manufactured 40,000
Costs incurred to advertise goods held for resale 20,000
Materials on hand not yet placed into production 350,000
Raw materials on which the company has started production, but which are not
completely processed 280,000
Factory supplies 20,000
Goods held on consignment from another company 450,000
Costs identified with units completed but not yet sold 260,000
Goods sold f.o.b. Buyer that are in transit on December 31 40,000
Temporary investment in stocks and bonds that will be resold in the near future 500,000

How much of these items would be reported as inventory in the financial statements?

14. Harvey Specter Sales Company uses the first-in, first-out (FIFO) method in calculating cost of goods sold for the
three products that the Company sells. At July 1, the balance of inventory account was P658,500, and the allowance
for inventory write-down was P3,000. Inventories and purchase information concerning the three products are given
for the month of July.
C P A
July 1 Inventory 50,000 units 30,000 units 65,000 units
@ P6.00 @ P10.00 @ P0.90
July 1 -15 Purchases 70,000 units 45,000 units 30,000 units
@ P6.50 @ P10.50 @ P1.25
July 16-31 Purchases 30,000 units
@ P8.00
July 1-31 Sales 105,000 units 50,000 units 45,000 units
July 31 Sales Price per unit P8.00 P11.00 P2.00
July 31 Inventory 45,000 units 25,000 units 50,000 units

On July 31, the Company’s suppliers reduced their prices from the most recent purchase prices by the following
percentages: product C, 20%; product P, 10%; product A, 8%. Accordingly, Harvey decided to reduce its sales prices
on all items by 10%, effective August 1. Harvey’s selling cost is 10% of sales price. Product C and P have a normal
profit (after selling costs) of 30% on sales prices, while then normal profit on product A (after selling cost) is 15%
of sales price.

The amount of Inventory to be reported on the Company’s statement of financial position at July 31 is
The loss on inventory write down for the month of July

15. The physical inventory on December 31, 2019 of Tin Company showed merchandise at P172,000. You discovered
that the following items were excluded from this amount:
 Merchandise costing P31,500 shipped by a vendor FOB Shipping Point on December 31, 2019 and received
on January 5, 2020.
 Merchandise costing P40,000 shipped by a vendor FOB destination on December 29, 2019 and received by
Tin Co. on January 4, 2020.
 Merchandise costing P12,500 which was shipped FOB destination to a customer on December 28, 2019.
The customer expected to received the merchandise on January 6, 2020.
 Merchandise costing P28,500 which was shipped FOB shipping point to a customer on December 29, 2019.
The goods are scheduled to arrive at the destination point on January 3, 2020.

What is the correct amount of inventory that should appear on Tin’s December 31, 2019 statement of financial
position?

1st Semester A.Y. 2020-2021 Quiz 2: Intermediate Accounting 1 JPB