QUIZ # 4

CASH & INVENTORY

PROBLEM 1

BIRD COMPANY is a manufacturer of small tools. The following information was obtained from the
company’s accounting records for the year ended December 31, 2019:

Inventory at December 31, 2019 (based on physical count in Bird’s

warehouse at cost on December 31, 2019.) P1,870,000
Account payable at December 31, 2019 1,415,000
Net Sales (sales less sales returns) 9,693,400

Your audit reveals the following information:

1. The physical count included tools billed to a customer FOB shipping point on December 31, 2019.
These tools cost P64,000 and were billed at P78,500. They were in the shipping area waiting to be
picked up by the customer.
2. Goods shipped FOB shipping point by a vendor were in transit on December 31, 2019. These goods
with invoice cost of P93,000 were shipped on December 29, 2019.
3. Work in process inventory costing P27,000 was sent to a job contractor for further processing.
4. Not included in the physical count were goods returned by customers on December 31, 2019.
These goods costing P49,000 were inspected and returned to inventory on January 7, 2020. Credit
memos for P67,800 were issued to the customers at that date.
5. In transit to a customer on December 31, 2019, were tools costing P17,000 shipped FOB shipping
point on December 26, 2019. A sales invoice for P29,400 was issued on January 3, 2020, when
Bird Company was notified by the customer that the tools had been received.
6. At exactly 5:00 pm on December 31, 2019, goods costing P31,200 were received from a vendor.
These were recorded on a receiving report dated January 2, 2020. The related invoice was
recorded on December 31, 2019, but the goods were not included in the physical count.
7. Included in the physical count were goods received from a vendor on December 27, 2019.
However, the related invoice for P36,000 was not recorded because the accounting department’s
copy of the receiving report was lost.
8. A monthly freight bill for P32,000 was received on January 3, 2020. It specifically related to
merchandise bought in December 2019, one-half of which was still in the inventory at December
31, 2019. The freight was not included in either the inventory or in accounts payable at December
31, 2019.

1. Bird’s December 31, 2019 inventory should be increased by __________

2. Bird’s accounts payable balance at December 31, 2019 should be increased by _________
3. The amount of net sales to be reported on Bird’s income statement for the year ended December
31, 2019 should be _________
4. Bird’s statement of financial position at December 31, 2019 should report accounts payable of
_________
5. The amount of inventory to be reported on Bird’s December 31, 2019 statement of financial
position should be __________