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CHAPTER 16-Inventories: Far Summary
CHAPTER 16-Inventories: Far Summary
CHAPTER 16-Inventories: Far Summary
By: wjmm
Trade Discounts and Cash Discounts Purchases based on vendor’s invoices P
- Trade discounts - amount deducted from list 512,678
price in order to arrive at the invoice price- it is not Trade discounts already deducted from 12,678
recorded. vendor’s invoices
After-sales warranty costs 25,786
Cash discounts - amount deducted from rom invoice Brokerage commission paid to agents for 42,890
price upon payment within the agreed discount period. It is arranging imports
used to encourage prompt payment. Import duties 12,675
Freight and Insurance 28,365
*BUYER *SELLER Salaries of Accounting department 76,900
Other handling costs relating to imports 49,870
Purchases Sales
What is the total cost of purchase?_________________
-Purchase discount -Sales discount
1. What is the journal entry to record the purchase? Allocation of Variable Production Overhead
A. using gross method - allocated to each unit based on actual use of
B. using net method production facilities.
2. Entry to record the payment if:
a. paid within the discount period – gross method Other Cost
b. not paid within discount period-gross method - included in inventory cost only to the extent that it
c. paid within the discount period- net method is incurred in bringing the inventories in its present location
d. not paid within discount period- net method and condition.
The following are expensed when incurred:
Cost of Inventories 1. Abnormal wastes (materials/labor and other
production cost)
1. Cost of Purchase 2. Storage costs on finished goods
Purchase price less trade discounts/rebates 3. Administrative overheads
+Import duties and irrevocable taxes 4. Distribution or selling costs
+Freight
+Handling & other direct cost Cost of Inventories of a Service Provider
- consists primarily of labor and other person el
*exclude foreign exchange differences cost directly engaged in providing service.
*Purchase subject to deferred settlement terms: - Its inventory may simply be described as work in
progress.
Interest expense= amount paid- price for normal credit terms
- Labor and cost related to sales and admin
personnel are expensed as incurred.
Problem 2
KTL Company has incurred the following costs in the year
2019:
By: wjmm
ANSWERS TO PROBLEMS:
Problem 1:
1.
A. Purchases *153,000
Accounts Payable *153,000
*P200,000 x 85% x 90%= P153,000
B. Purchases *148,410
Accounts Payable 148,410
* P153,000 x 97%= P148,410
2.
A. Accounts Payable 153,000
Cash 148,410
Purchase discount * 4,590
Problem 2
TOTAL P 646,478
By: wjmm