Tarlac State University College of Business & Accountancy

Accountancy Department Quiz on Inventories

Proverbs 3:5-6
“Trust in the Lord with all your heart and lean not on your own understanding; in all your ways acknowledge Him, and He will make your paths
straight.”

Name: Score:
Directions: Encircle the letter choice that corresponds to your answer. Any form of erasures on the letter
choices will render your answers invalid.

1. The following goods must be excluded from inventories except [A] Goods in transit, sold FOB shipping
point [B] Goods in transit, purchased FOB shipping point [C] Goods held on consignment [D]
Undelivered finished goods to a customer, covered by a special order, fabricated based on the
requirements of the customer

2. Under the perpetual method of inventory accounting, the “Inventory” account is debited for the following
transactions, except [A] purchase of merchandise on account [B] return of goods by the customers [C]
adjustment for inventory overage at year-end [D] return of goods to suppliers

3. Under the net method of recording of account purchases, any discount foregone shall be recorded as
“Purchase discount lost” and accounted for as [A] an addition to cost of sales [B] deduction from cost of
sales [C] other expense [D] contra – purchase item

4. In a period of constantly increasing prices, which of the following inventory costing methods will yield the
highest ending inventory value? [A] FIFO [B] moving average [C] LIFO [D] average periodic

5. In a period of constantly decreasing prices, which of the following inventory costing methods will yield
the highest cost of sales value? [A] FIFO [B] moving average [C] LIFO [D] average periodic

6. Which of the following transactions will cause a change in the average unit cost under the average
perpetual costing method? [A] sale [B] sales return [C] purchase [D] sales discount

7. In accounting for purchase commitments, the accounts payable on the date of delivery shall be credited at
[A] the committed price [B] the prevailing price on the date of delivery [C] the committed price or the
prevailing price on the date of delivery whichever is higher [D] the committed price or the prevailing price
on the date of delivery whichever is lower

8. Inventories are measured at [A] cost [B] net realizable value [C] lower of cost or fair value less cost to sell
[D] lower of cost or net realizable value

9. When determining the unit cost of an inventory item, which of the following should not be included? [A]
depreciation of plant equipment used in manufacturing the item [B] labor cost of the item when
manufactured [C] commission paid when purchased [D] interest on loan obtained to purchase the item

10. An entity is a large manufacturer of machines. A major customer has placed an order for a special machine
for which it has given a deposit to the entity. The parties have agreed on a price for the machine. When
should the revenue be recognized by the entity? [A] when the customer orders the machine [B] when the
deposit is received [C] when the machine is delivered to the customer [D] when the machine is completely
manufactured without regard to delivery

PROBLEMS
(P1) The inventory on hand at December 31, 2019 of Inventor Yee Company is valued at a cost of Php
900,000. The following items were not included in this inventory amount:

A. Goods in transit, purchased FOB shipping point, invoice price Php 30,000, including freight cost of P
1,000.
B. Goods out on consignment to ConSai Knee at a sales price of Php 20,000, including mark up of 20% of
the sales price.
C. Items purchased costing Php 50,000, invoice received but goods are still in transit. Freight was paid by the
seller
D. Goods in transit, sold to Sasa Lee Company, FOB shipping point, invoiced for Php 17,500. The goods
were sold with a gross profit of 40% based on cost.

REQUIRED:
1. Adjusted amount of Inventory as at December 31, 2019.
(P2) Kooze Ting Co. provided the following information relating to its inventory for the month of January:
 Date Particulars Units Unit Cost Total Cost
Jan 01 Beginning balance 40,000 5 200,000
Jan 05 Purchases 30,000 6 180,000
Jan 10 Sale 50,000
Jan 15 Purchases 10,000 7 70,000
Jan 20 Purchases 5,000 8 40,000
Jan 31 Sale 27,000

REQUIRED:
1. Ending inventory – FIFO costing method, as at end of January
2. Cost of sales for the month of January under the FIFO costing method

(P3) On November 30, 2019 Inventor Yee Company entered into a commitment to purchase 100 units of
Product X from Comet Mint Company on March 31, 2020 at a price of Php 1,200 per unit. On December 31,
2019, the market price of the product is Php 1,100 per unit and Php 1,150 on February 28, 2020. On March 31,
2020, the price of the product is Php 1,210 per unit.

REQUIRED:
1. Entry to record the “Loss on purchase commitment”, if any, on December 31, 2019.
2. Amount to be credited to “Accounts payable” account on March 31, 2020.
3. Amount to be debited to “Purchases” account on March 31, 2020.
4. Gain or loss on purchase commitment to be recognized on the date of delivery.

(P4) The following data were provided by WRITE-UP Corp. for the year 2019:
Particulars Beginning inventory (10,000 units) Ending inventory (8,000 units)
Cost per unit Php 10 Php 11
Estimated selling price 12 16
Estimated cost to sell 3 2

Purchases for the year 2019 1,000,000

Freight – in – 2019 10,000
Purchase returns – 2019 25,000

REQUIRED:
1. Cost of sales for the year ended December 31, 2019.
2. Loss on inventory writedown or gain on reversal of inventory writedown to be reported for the year
ended December 31, 2019.

(P5) As at December 31, 2019, INVENTOR YEE Company had inventory of Php 1,000,000 (based on a
physical count conducted at year-end), accounts payable of Php 500,000 and sales of Php 4,000,000 before
considering the following data:

A. Php 150,000 in goods located in the company’s warehouse that are held on consignment from another
entity were recorded as on account purchases and were included in the inventory count.

B. Goods costing Php 200,000 that were sold by the company and shipped on December 30, terms FOB
destination, and were in transit on December 31, 2019. The goods were received by the customer on
January 2, 2020. The related sale for Php 240,000 was recorded in 2019.

C. Php 300,000 in goods that were purchased by the company and shipped on December 30 and were in
transit on December 31, 2019. The related invoice was received and recorded by INVENTOR YEE on
December 31, 2019. The goods were received by the company on January 2, 2020. Terms were FOB
shipping point.

D. Goods costing Php 150,000 that were sold by the company and shipped on December 30 and were in
transit on December 31, 2019. The goods were received by the customer on January 2, 2020. Terms
were FOB shipping point. The related sale for Php 180,000 was recorded in 2020.

REQUIRED:

1. Adjusted inventory as at December 31, 2019

2. Adjusted accounts payable balance as at December 31, 2019
3. Adjusted sales for the year ended December 31, 2019