INTERMEDIATE ACCOUNTING 2

Practice Set – Inventories (Problems)

INITIAL RECOGNITION:

1. Halls Menthol, Inc. had 10,200 units on April 30, 2021 in inventory after considering the date below as purchases and sales
No. Recorded Transaction Terms No. of units
1 Purchase FOB shipping point 300
2 Purchase FOB destination 250
3 Sale FOB shipping point 500
4 Sale FOB destination 650

Items 1 to 4 were shipped by the seller April 30, 2021 and received by the buyer May 5, 2021. By analyzing the terms of
shipment, how many units should be considered as inventory at the end of April, 2021?
A. P10,850 C. P11,900
B. P11,150 D. P10,600 RPCPA 0593

2. The unadjusted physical inventory of Liberty Co. at December 31, 2020 was P3,000,000. Other information follows:
➢ Goods were received and recorded on January 4, 2021 with cost of P180,000. These were shipped by the supplier on
December 29, 2020, FOB shipping point.
➢ Merchandise in the warehouse costing P240,000 was billed to the customer FOB shipping point on December 29, 2020.
These were excluded from inventory although shipped on January 3, 2021.

How much should Liberty report as inventory in its December 31, 2020 balance sheet?
A. P3,240,000 C. P3,180,000
B. P3,420,000 D. P3,000,000 RPCPA 0597

3. The unadjusted physical inventory of Erzil Company at December 31, 2013 was P5,000,000. Other information follows:
➢ Goods were received and recorded on January 4, 2014 with cost of P500,000. These goods were shipped by suppliers
on December 29, 2013, FOB shipping point.
➢ Goods in the warehouse costing P1,500,000 were billed to the customer FOB shipping point on December 29, 2013. The
goods were included in inventory because they were shipped on January 3, 2014.

How much should Erzil report as inventory on its December 31, 2013 balance sheet?
A. 5,500,000 C. 4,000,000
B. 7,000,000 D. 5,000,000

4. Laoag Company’s inventory at December 31, 2020 was P8,000,000 based on physical count priced at cost and before any
necessary adjustment for the following:
➢ Merchandise costing P300,000, shipped FOB destination from a vendor on December 30, 2020 was received and
recorded on January 5, 2021.
➢ Goods in the shipping area were excluded from inventory although shipment was not made until January 5, 2021. The
goods billed to the customer FOB shipping point on December 30, 2020, had a cost of P200,000.

What should Laoag report as inventory in its December 31, 2020 balance sheet?
A. 8,500,000 C. 8,200,000
B. 8,300,000 D. 8,000,000 CPAR 4126

5. Hero Company’s inventory at December 31, 2004 was P7,500,000 based on physical count priced at cost and before any
necessary adjustment for the following:
➢ Merchandise costing P450,000 shipped FOB shipping point from a vendor on December 30, 2004, was received and
recorded on January 5, 2005.
➢ Goods from the shipping area were excluded from inventory although shipment was not made until January 4, 2005. The
 goods, billed to the customer FOB shipping point on December 30, 2004, had a cost of P600,000.

What amount should Hero report as inventory in its December 31, 2004 balance sheet?
A. 7,500,000 C. 8,100,000
B. 7,950,000 D. 8,550,000 AICPA adapted

6. In an annual audit of Tristan John Company, you find that a physical inventory on December 31, 2004, showed merchandise
with a cost of P440,000 was on hand at that date. You also find the following transactions near the dosing date.
1. A special machine, fabricated to order for a customer casting 15,000, was finished and specifically segregated in the back
part of the shipping room on December 31, 2004. The customer was billed on that date and the machine excluded from
inventory although it was shipped on January 4, 2006.
2. Merchandise costing P3,000 was received an January 3, 2005, and the related purchase invoice recorded January 5. The
invoice showed the equipment was made on December 29, 2004, f.o.b. destination.
3. A packing case containing a product costing P34,000 was standing in the shipping room when the physical inventory
was taken. It was not included in the inventory because it was marked "hold for shipping instructions". Your investigation
revealed that the customer's order was dated December 18, 2004 but that the case was shipped and the customer billed
on January 10, 2005.
4. Merchandise received on January 6, 2005, costing P6,000 was entered in the purchase journal on January 3, 2005. The
invoice showed shipment was made f.o.b. supplier !s warehouse on December 31, 2004.
5. Merchandise costing P7,000 was received on December 28, 2004, and the invoice was not recorded. You located it in
the hands of the purchasing agent and it was marked on consignment.

The amount of inventory that should appear on the balance sheet at December 31, 2004 is:
A. 480,000 C. 487,000
B. 495,000 D. 502,000

7. The Mabuhay Mfg. Co. in its balance sheet as of December 31, 1991 has an inventory the amount of P176,000 which consists
of:
Direct materials P55,000
Direct materials purchases in transit, FOB destination 12,000
Direct materials purchases in transit, FOB shipping point 9,000
Prepaid insurance on inventory 2,000
Work-in-process 38,000
Finished goods 45,000
Goods shipped on consignment, at selling price with 20% profit on sales 15,000

What is the cost of inventory to be shown in the balance sheet of Mabuhay Mfg. Co. as of December 31, 1991?
A. P162,500 C. P159,000
B. P150,000 D. P159,500 RPCPA 1092

8. A listing of the Emma Company's inventory items at the end of 2005 totals P950,000. Included in this amount are the following
items:
Merchandise in transit as of 12/12/2005, purchased FOB shipping point 68,000
Goods held by Emma as consignee, from Ronald 50,000
Goods out on consignment, at cost plus 50%
Markup on cost plus P1,000 delivery charge 61,000

What is the peso amount of Emma's 2005 ending Inventory that should be reported on the balance sheet?
A. 831,000 C. 879,000
B. 862,000 D. 880,000
9. EXCELL reported P70,000 of inventory on December 31, 1993, based on physical count. Additional information was given as
follows:
1. Included in the physical count were machines billed to a customer, FOB shipping point, on December 31, 1993. The
machines had a cost of P3,000 and have been billed at P5,000. The shipment is ready for pick-up by the delivery
contractor.
2. Goods were in transit from a vendor. The invoice cost was P8,000 and goods were shipped FOB shipping point on
December 31, 1993.
3. Work in process costing P500 was sent to an outside processor for finishing on December 30, 1993.
4. Goods out on consignment amounted to P4,600 (sales price); shipping costs, P120 (markup is 15% on cost).

The correct amount of inventory on December 31, 1993 is

A. P85,620 C. P82,620
B. P85,500 D. P82,500

10. An enterprise had the following account balances in the pre-closing trial balance:
Opening inventory 100,000
Closing inventory 150,000
Purchases 400,000
Transportation-in 6,000
Purchase discounts 40,000
Purchase allowances 15,000
Returned purchases 5,000

The enterprise had net purchases for the period of

A. 340,000 C. 370,000
B. 346,000 D. 376,000

11. Duke company specializes in the sale of IBM compatibles and software packages. It had the following transactions with one
of its suppliers:
Purchases of IBM compatibles 1,700,000
Purchases of commercial software packages 1,200,000
Returns and allowances 50,000
Purchase discounts taken 17,000

Purchases were made throughout the year on terms 2/10, n/30. All returns and allowances took place within 5 days of purchase
and prior to any payment on account. Discount lost is:
A. 57,000 C. 17,000
B. 40,000 D. 41,000

12. From the following information, determine the amount of freight-in:

Beginning Inventory ................................... P20,000
Purchases ............................................. 41,000
Purchase Returns and Allowances ....................... 3,000
Purchase Discounts .................................... 4,000
Freight-In ............................................ ?
Cost of Goods Available for Sale ...................... 55,000
Ending Inventory ...................................... ?
Cost of Goods Sold .................................... 22,000

A. P3,000 C. P2,000
B. P4,000 D. P1,000
13. On December 26, 2004, Karen Company purchased goods costing P5,000,000. The freight term is FOB destination. Some of
the costs incurred in connection with the sale and delivery if the goods were:
Packaging for shipment 100,000
Shipping 200,000
Special handling charges 300,000

These goods were received on December 31, 2004. In the December 31, 2004 balance sheet, what amount of cost for these
goods should be included in inventory?
A. 5,000,000 C. 5,300,000
B. 5,600,000 D. 5,500,000

INVENTORY ACCOUNTING SYSTEMS & COST FLOW ASSUMPTIONS:

14. Illustrated below is a perpetual inventory card for 2021.

Date Units Purchased Units Sold Units Balance
January 1 0
January 12 1,000 @ 2.00 1,000
March 15 300 700
May 5 500 @ 2.20 1,200
July 8 500 700
November 24 1,000 @ 1.65 1,700

Additional Information:
➢ The enterprise had no opening inventory.
➢ The items sold on March 15 were purchased on January 12.
➢ The items sold on July 8 were purchased on May 5.

The cost of goods sold under the specific identification method of inventory valuation is:
A. 1,320 B. 1,520 C. 1,600 D. 1,700

15. An enterprise had 500 units of opening inventory that cost 5 per unit. On March 1, the company purchased 300 units at a cost
of 7 each. On September 1, another 300 units were purchased. During the year, 700 units were sold, and the balance of ending
inventory is 2,500. If the enterprise uses the first-in, first-out (FIFO) method of inventory valuation, the per unit cost of the items
purchased on September 1 was:
A. 3.67 B. 6.00 C. 6.67 D. 7.58

16. The inventory records of FAME, Inc could not be located because the accountant quit without a formal turnover of records. In
order to re-construct the inventory at the beginning the store manager gathered the following data from their sales records for
the month of January:
Units Unit Price
January sales 160,500 P12.00
January purchases:
January 04 30,000 7.80
10 37,500 7.50
16 45,000 7.20
24 42,000 7.40

As of January 31, 45,000 units were on hand, FAME’s gross profit on sale for January was P738,600. The company has
always used a periodic FIFO inventory costing system.

What was the unit average cost of the January 1 inventory? (Rounded to the nearest centavo)
A. P7.44 B. P7.25 C. P7.70 D. P7.30 RPCPA 0592
17. Inventory records for Cyclops Herbicide revealed the following:

March 1, 2020, inventory - 1,000 gallons @ P7.20 = P7,200

Purchases: Sales:
Mar. 10 600 gals @ P7.25 Mar.5 400 gals
Mar. 16 800 gals @ P7.30 Mar. 14 700 gals
Mar. 23 600 gals @ P7.35 Mar. 20 500 gals
Mar. 26 800 gals
The ending inventory assuming FIFO is:
A. P4,410 C. P4,320
B. P4,350 D. P4,330

18. Jensen Company uses a perpetual inventory system. The following purchases and sales were made during the month of
May:
Date Activity Description
May 1 Balance 100 units at P10 per unit
May 9 Purchase 200 units at P10 per unit
May 16 Sale 190 units
May 21 Purchase 150 units at P12 per unit
May 29 Sale 120 units

If Jensen Company uses the first-in, first-out (FIFO) method of inventory valuation, the May 31 inventory would be:
A. P1,400 C. P1,493
B. P1,460 D. P1,680

19. Sawyer Corporation is a wholesaler of industrial air compressor parts. The activity for Part Number C-588 during May is as
follows.
Date Balance or Transaction Units Unit Cost Total Cost
May 1 Inventory 1,400 P2.45 P3,430
7 Purchase 1,800 2.75 4,950
16 Sales 2,000
20 Purchase 1,500 2.90 4,350
28 Sales 1,400
If Sawyer uses a first-in, first-out perpetual inventory system, the total cost of the inventory for Part Number C-588 at May 31
is
A. P3,230 C. P3,575
B. P3,510 D. P3,770

20. Addison Hardware began the month of November with 150 large brass switch plates on hand at a cost of P4.00 each. These
switchplates sell for P7.00 each. The following schedule presents the sales and purchases of this item during the month of
November.
Purchases
Date of Transaction Quantity Received Unit Cost Units Sold
November 5 100
November 7 200 P4.20
November 9 150
November 11 200 4.40
November 17 220
November 22 250 4.80
November 29 100

If Addison uses FIFO inventory pricing, the value of the inventory on November 30 would be
A. P936 C. P1,046
B. P1,012 D. P1,104
21. A merchandising company had the following inventory related transactions in its first year of operations:
Date Purchases in Units Sales in Units Balance in Units
Jan. 1 10,000 @ 5 10,000
March 1 6,000 @ 6 16,000
May 1 3,000 13,000
July 1 8,000 @ 6.25 21,000
Sept. 1 12,000 9,000
Nov. 1 5,000 @ 7 14,000
Dec. 1 2,000 12,000

If the company uses the first-in-first-out (FIFO) method of inventory valuation, its ending inventory balance (rounded) will be:
A. 62,000 C. 78,750
B. 70,759 D. 84,000

22. Illustrated below is a perpetual inventory card for 2021.

Date Units Purchased Units Sold Units Balance

January 1 0
January 12 1,000 @ 2.00 1,000
March 15 300 700
May 5 500 @ 2.20 1,200
July 8 500 700
November 24 1,000 @ 1.65 1,700

Additional Information:
➢ The enterprise had no opening inventory.
➢ The items sold on March 15 were purchased on January 12.
➢ The items sold on July 8 were purchased on May 5.

The ending inventory balance under the first-in, first-out (FIFO) method of inventory valuation is
A. 3,050 C. 3,230
B. 3,150 D. 3,430

23. The records of Ivory Corporation show the following data as of December 31, 2021:

Inventory on hand, December 1, 2021 was 350 basketballs costing P200 each.

Transactions during the months of December, 2021 were as follows:

Date Purchases Sales
Dec. 10 250 units @ P300/unit
15 260 units @ P220/unit
25 200 units @ P210/unit
28 350 units @ P315/unit

Ivory does not maintain perpetual inventory records. The inventory on hand on December 31, 2021 was 210 basketballs.
The cost of inventory on December 31, 2021 under the simple average method is:
A. P42,000.00 C. P44,100.00
B. P43,499.40 D. P70,000.00 RPCPA 0588
24. Purchases and sales during a recent period for Coleman, Inc. were:
Purchases During the Period Sales During the Period
1st Purchase 500 units @ P2 1st Sale 600 units @ P7
2nd Purchase 1,000 units @ P3 2nd Sale 750 units @ P8
3rd Purchase 500 units @ P4 3rd Sale 500 units @ P9
4th Purchase 500 units @ P5 4th Sale 500 units @ P10
2,500 units 2,350 units

Beginning inventory was 100 units at P1 each. Given this information, what is the cost per unit available for sale during the
year when using the weighted-average cost method (rounded to the nearest cent)?
A. P2.61 C. P3.31
B. P3.10 D. P3.53

25. The following information taken from the inventory records of the Corny Co. for January 2021 was
Units Unit Cost Total Cost
Balance at January 1 5,000 P8.024 P40,120
Purchases:
January 10 2,000 P8.500 17,000
January 25 4,800 P8.750 42,000
Sales:
January 12 3,000
January 30 5,300

Corny Co. does not maintain perpetual inventory records.

What should be the inventory on January 31, 2021 using the weighted-average method (rounded to the nearest peso)?
A. P29,400 C. P29,785
B. P29,470 D. P30,188

26. Campbell's Clothing Store sells jeans. During January 2021, its inventory records for one brand of designer jeans were as
follows:
Beginning Inventory .................... 10 pairs @ P 20 = P 200
January 6 Purchase ..................... 4 pairs @ 25 = 100
January 10 Sale ........................ 5 pairs
January 15 Purchase .................... 7 pairs @ 30 = 210
January 20 Sale ........................ 10 pairs
January 25 Purchase .................... 4 pairs @ 30 = 120

Using this information, the cost of goods sold using the average cost method is:
A. P378 C. P265.
B. P358 D. P236.

27. Frey Company recorded the following data pertaining to raw material Y during January 2021.
Units
Date Received Cost Issued On hand
1/1 Inventory 200 8,000
1/8 Issue 4,000 4,000
1/20 Purchase 12,000 240 16,000

The moving-average unit cost of Y inventory at January 31, 2021 is:

A. 220 C. 230
B. 224 D. 240
28. Dark Co. recorded the following data pertaining to raw material X during January 2021:
Units
Date Received Cost Issued On Hand
1/1/01 Inventory P4.00 3,200
1/11/01 Issue 1,600 1,600
1/22/01 Purchase 4,000 P4.70 5,600

The moving-average unit cost of X inventory at January 31, 2021 is:

A. P4.35 C. P4.50.
B. P4.43 D. P4.70

29. During January 2021, Metro Company which maintains a perpetual inventory system, recorded the following information
pertaining to its inventory:
Units Unit cost Total cost Units on hand
Balance on 1/1 10,000 100 1,000,000 10,000
Purchased on1/7 6,000 300 1,800,000 16,000
Sold on 1/20 9,000 7,000
Purchased 1/25 4,000 500 2,000,000 11,000

Under the moving average method, what amount should Metro report as inventory at January 31, 2021?
A. 2,640,000 C. 3,300,000
B. 3,225,000 D. 3,900,000

30. Thomas Engine Company is a wholesaler of marine engine parts. The activity of carburetor 2642J during the month of March
is presented below:

Date Balance or Transaction Units Unit Cost Unit Sales Price

March 1 Inventory 3,200 P64.30 P86.50
4 Purchase 3,400 64.75 87.00
14 Sales 3,600 87.25
25 Purchase 3,500 66.00 87.25
28 Sales 3,450 88.00
If Thomas uses a moving-average perpetual inventory system, the total cost of the inventory for carburetor 2642J at March 31
is:
A. P194,200 C. P199,233
B. P198,301 D. P265,960

31. Panay Company uses the weighted average method to determine the cost of its inventory. Panay recorded the following
information pertaining to its inventory:
Units Unit cost Total cost
Balance 1/1 80,000 60 4,800,000
Sold on 1/15 70,000
Purchased on 1/31 40,000 90 3,600,000

What amount of inventory should Panay report in its January 31, 2003 balance sheet?
CPAR 4126 A. B. C. D.
Perpetual 4,200,000 3,500,000 4,200,000 3,500,000
Periodic 3,500,000 4,200,000 3,750,000 3,750,000