Intermediate Accounting 1 - -Chapter 7- Inventories

26. Solution:
Inventory Accounts payable
Unadjusted balances 500,000 120,000
(b) 60,000 -
(c) (80,000) (80,000)
(d) 50,000 50,000
(e) 30,000 -
Adjusted balances 560,000 90,000

27. Solution: 180,000 – 30,000 + [(18,000 + 2,000) x ½] = 160,000

28. Solution:
a. Inventory in display shelves
100,000
b. Inventory stocked in warehouse
250,000
c. Inventory sold under a bill and hold
arrangement,
included in the stock of inventory in warehouse (20,000)
d. Inventory purchased in installment sale,
physical
possession is obtained but the seller retains
legal title
to the goods until full payment of purchase
price 30,000
e. Inventory pledged as collateral security for a
bank loan 60,000
g. Inventory sold wherein ABC Co. is obligated to
repurchase the inventory at a future date 10,000

430,000

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29. Solutions:
Requirement (a): FIFO Periodic
Ending inventory, in units = (3,000 + 2,250 + 10,200 – 2,700 – 7,200) = 5,550

Units Unit cost Total cost

Ending inventory in units 5,550

Allocation to latest purchases:

Jan. 26 2,250 20.60 46,350

Jan. 6 (balance) 3,300 21.50 70,950

Ending inventory in pesos 117,300

TGAS (58,650 + 219,300 + 46,350) 324,300

Less: Ending inventory in pesos (117,300)

COGS 207,000

Requirement (b): FIFO Perpetual

Answers are the same with FIFO Periodic.
OR
Units Unit Cost Total Cost

Balance at January 1, 2002 3,000 19.55 58,650

January 6, 2002 10,200 21.5 219,300

January 7, 2002 (2,700) 19.55 (52,785)

January 26, 2002 2,250 20.6 46,350

January 31, 2002 (7,200) * (154,215)*

Ending inventory 5,550 117,300

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*The COGS on the Jan. 31 sale is computed as follows:
Units Unit Cost Total Cost

Jan. 31 sale 7,200

Allocation:

From Jan. 1 (3,000 - 2,700) 300 19.55 5,865

From Jan. 6 (balance) 6,900 22 148,350

COGS - Jan. 31 sale 154,215

COGS = (52,785 + 154,215) amounts taken from table above = 207,000

Requirement (c): Weighted Average Cost Periodic

TGAS in pesos
Weighted ave. unit cost =
TGAS in units

(58,650 + 219,300 + 46,350) = 324,300

Weighted ave. unit cost =
(3,000 + 10,200 + 2,250) = 15,450

Weighted ave. unit cost = 20.99

Ending inventory in units 5,550

Multiply by: Wtd. Ave. Cost 20.99

Ending inventory in pesos 116,495

TGAS in pesos 324,300

Less: Ending inventory in pesos (116,495)

COGS 207,805

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Requirement (d): Weighted Average Cost Perpetual
Units Unit Cost Total Cost

Balance at January 1, 2002 3,000 19.55 58,650

January 6, 2002 10,200 21.5 219,300

TGAS 13,200 21.06 277,950

January 7, 2002 (2,700) 21.06 (56,862)

January 26, 2002 2,250 20.6 46,350

TGAS 12,750 20.98 267,438

January 31, 2002 (7,200) 20.98 (151,056)

Ending inventory 5,550 116,382

COGS = (56,862 + 151,056) = 207,918

30. Solution:
Requirement (a):

Product A Product B Product C Total

Purchase price 100,000 250,000 300,000

Freight-in 12,000 30,000 36,000

Cost 112,000 280,000 336,000

Selling price 210,000 300,000 570,000

Freight-out (10,500) (75,000) (11,400)

NRV 199,500 225,000 558,600

Lower 112,000 225,000 336,000 673,000

Requirement (b):

Product B: (280,000 – 225,000) = 55,000

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PROBLEM 5: THEORY
1 C 6 C 11 A 16 D
2 B 7 D 12 A 17 C
3 B 8 A 13 A 18 A
4 D 9 D 14 C 19 C
5 A 10 A 15 C

PROBLEM 8-8: MULTIPLE CHOICE: COMPUTATIONAL

1. A

2. C Net method [(80K + 100K) x 98%] = 176,000

Gross method (80K x 98%) + 100K = 178,400

3. B 100K x 80% = 80,000

4. C 300,000 + 7,500 – 1,500 = 306,000

5. A
Solution:
Inventory
beg. 160,000 10,000 Purchase Disc.
Purchases 530,000 465,000 COGS (squeeze)
215,000 end.
6. A
Solution:
Inventory
beg. 30,000
Purchases 40,000 5,000 Purchase Ret. and Allow.
Freight-In 5,000 4,000 Purchase Disc.
51,000 COGS
15,000 end.

7. C
Solution:
beg. 35,000
Purchases 35,000
Freight-In 5,000

IA1-Inventories-page 5
 Purchase Ret. and Allow. (2,000)
Purchase Disc. (4,000)
Net purchases 34,000
TGAS 69,000

8. D
Solution:
TGAS 55,000
Beginning Inventory (20,000)
Purchases (41,000)
Purchase Returns and Allowances 3,000
Purchase Discounts 4,000
Freight-in 1,000

9. C
Solution:
TGAS 55,000
COGS (22,000)
Ending inventory 33,000

10. B
Solution:
Raw materials
beg. 11,000
Purchases 150,000 146,000 DM
15,000 end.

WIP
beg. 20,000
Direct materials 146,000
Direct labor 60,000
Factory overhead:
Indirect factory labor 30,000
Taxes and depn. - factory bldg. 10,000
Utilities (60% x 25,000) 15,000 257,000 COGM
24,000 end.

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 Finished goods
beg. 12,500
COGM 257,000 260,500 COGS
9,000 end.

11. D
Solution:
Date Balance/Transaction Units Cost
Aug. 1 Inventory 2,000 ₱36.00
7 Purchase 3,000 37.2
12 Sales (3,600)
21 Purchase 4,800 38
22 Sales (3,800)
29 Purchase 1,600 38.6
Ending inventory 4,000

Units Unit cost Total cost

Ending inventory 4,000
From Aug. 29 purchase (1,600) 38.6 61,760
Balance 2,400
From Aug. 21 purchase (2,400) 38 91,200
As allocated - 152,960

12. D Same with FIFO periodic

13. B
Solution:
Total
Date Balance/Transaction Units Cost
cost
1-Jul Inventory 2,000 72,000
36.00
7 Purchase 3,000 37.00 111,000
21 Purchase 5,000 37.88 189,400
29 Purchase 1,600 38.11 60,976
Total goods available for sale 11,600 433,376
Average cost = 433,376 ÷ 19,000 = 22.81

IA1-Inventories-page 7
 Date Balance/Transaction Units
1-Jul Inventory 2,000
7 Purchase 3,000
12 Sales (3,600)
21 Purchase 5,000
22 Sales (3,800)
29 Purchase 1,600
Ending inventory 4,200
Average cost 37.36
Ending inventory in pesos 156,912

14. C
Solution:
Date Transaction Units Cost Total cost
1-Jul Inventory 2,000 36.00 72,000
7 Purchase 3,000 37.00 111,000
Total 5,000 36.60 183,000
12 Sales (3,600) 36.60 (131,760)
21 Purchase 5,000 37.88 189,400
Total 6,400 37.60 240,640
22 Sales (3,800) 37.60 (142,880)
29 Purchase 1,600 38.11 60,976
Ending inventory 4,200 158,736

15. A
Solution:
Ending inventory in units is computed as follows:
Units
beg. 10
January 6 Purchase 4
January 10 Sale (5)
January 15 Purchase 7
January 20 Sale (10)
January 25 Purchase 4
Ending inventory 10

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Total goods available for sale in pesos is computed as follows:
Units Unit cost Total cost
beg. 10 20 200
January 6 Purchase 4 25 100
January 15 Purchase 7 30 210
January 25 Purchase 4 30 120
TGAS 25 630

FIFO ending inventory in pesos is computed as follows:

Units Unit cost Total cost
Ending inventory 10
From Jan. 25 purchase (4) 30.0 120
Balance 6
From Jan. 15 purchase (6) 30 180
As allocated - 300

FIFO cost of goods sold is computed as follows:

TGAS 630
Ending inventory (300)
COGS 330

16. A
Solution:
TGAS in pesos (see previous solution) 630
Divide by: TGAS in units (see previous solution) 25
Average unit cost 25.20
Multiply by: EI in units (see previous solution) 10
Average EI 252.00

TGAS in pesos (see previous solution) 630

Average EI (252)
COGS 378

17. C
Solution:
Total goods available for sale is computed based on information
under LIFO as follows:
Cost of goods sold (LIFO) 195,000
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 Ending inventory in pesos (LIFO) 45,000
Total goods available for sale 240,000

Using the concept that total goods available for sale is the same
under both FIFO and LIFO, the FIFO cost of goods sold is simply
squeezed as follows:
LIFO FIFO
TGAS in pesos 240,000 240,000 extended from LIFO
Ending inventory in pesos (45,000) (65,000) given information
Cost of goods sold 195,000 175,000 squeezed

18. A
Solution:
Accounts payable
- beg.
Disbursements 290,000 315,000 Purchases (squeeze)
end. 25,000

Inventory
beg. 10,000
Purchases 315,000 325,000 COGS (squeeze)
- end.
19. D
Solution:
Raw materials
beg. -
Purchases 215,000 207,500 DM (squeeze)
7,500 end.

WIP
beg. -
DM 207,500
DL 100,000
FOH 150,000 457,500 COGM (squeeze)
- end.

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 Finished goods
beg. 17,500
COGM 457,500 475,000 COGS (squeeze)
- end.
20. C No adjustment is necessary for the foregoing. The goods are
properly included in inventory because they were shipped only on
July 10, 2002, after the June 30, 2002 cut-off date. The goods
purchased FOB destination are properly excluded from inventory
because they are not yet received as of cut-off date.

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