Financial Accounting and Reporting – Inventories

Inventories Allocation of fixed production overheads

− It must be based on normal capacity
Scope − The actual capacity may be used if it approximates
normal capacity
PAS 2 applies to all inventories in financial statements except: − Fixed overhead allocated to each unit of production is not
 work-in-progress under construction contracts increased as a consequence of low production or idle
 financial instruments; and plant
− Unallocated overheads are recognized as expensed as
 Biological assets under PAS 41
incurred
− When production is abnormally high, the fixed overhead
Exempt from PAS 2’s measurement rules
allocated to each unit is decreased so that inventories
 Producers of agricultural and forest products
are not measured above cost.
 Commodity-broker traders
− The allocation of variable production overheads to each
unit is based on the actual use of production facilities.
Definition − costs such as distribution and selling must be excluded,
together with cost of storing raw materials and work in
Inventories are assets progress, unless it is necessary that storage costs be
(a) held for sale in the ordinary course of business; incurred prior to further processing, which may
(b) in the process of production for such sale; or occasionally be the case
(c) in the form of materials or supplies to be consumed in the
production process or in the rendering of services Excluded costs (expensed as incurred)
(a) abnormal amounts of wasted materials, labor, or other
Net realizable value (NRV) is the estimated selling price in the production costs;
ordinary course of business less the estimated costs of (b) storage costs, unless those costs are necessary in the
completion and the estimated costs necessary to make the production process prior to a further production stage;
sale. (c) administrative overheads that do not contribute to
bringing inventories to their present location and
Fair value is the price that would be received to sell an asset condition; and
or paid to transfer a liability in an orderly transaction between (d) selling costs.
market participants at the measurement date.
Cost measurement method
Inventories of service provider (a) Not interchangeable – specific identification
If the entity is a service provider, its inventories may be (b) Large number of Interchangeable items
intangible, e.g. the costs of the service for which the entity − First-in, First-out (FIFO)
has not yet recognized the related revenue). The inventory of − Weighted average
service providers will probably consist mainly of the labor
costs of the people providing the service. FIFO Weighted average
Approximates the actual Average unit cost is revised
NRV vs Fair Value physical flow of the at the end of a
inventories predetermined period (e.g.
NRV Fair Value end of month)
Amount expected to be Price at which an orderly Ending inventory and cost Particularly suitable for
realized from sale of transaction to sell the same of goods sold are the same homogenous products and
inventory in the ordinary inventory in the principal (or whether a periodic or a periodic inventory system
course of business most advantageous) market perpetual inventory system
for that inventory would take is used
place between market
participants at the FIFO LIFO
measurement date Goods from beginning The most recent purchases
inventory and the earliest are assumed to be the first
Entity-specific value Market-based purchased are assumed to goods sold
be the goods sold first
Measurement In a period of rising prices, In period of rising prices,
Inventories shall be measured at the lower of cost of goods sold is made cost of goods sold is made
up of the earlier, lower- up to the latest, higher-
(a) cost and
priced goods resulting in a priced goods resulting in a
(b) net realizable value
larger profit. lower profit.
The ending inventory is Attempts to achieve
Cost made up of more recent something closer to
 Cost of purchase purchase and thus replacement cost
− Purchase price represents a more current accounting for the income
− Import duties value on the balance sheet statement while
− Unrecoverable taxes, transport, handling cost disregarding the balance
− Other costs directly attributable to the acquisition of sheet.
finished goods, materials and services
− Trade discounts Net realizable value
− Rebates (e.g. upfront cash incentive) Inventories should not be carried at amounts greater than
 Cost of conversion those expected to be realized from their sale or use.
− Direct materials and direct labor costs
− Fixed and variable production overheads that are NRV is likely to be less than cost where there has been:
incurred in converting materials into finished goods, (a) An increase in costs or a fall in selling price
allocated on a systematic basis. (b) A physical deterioration in the condition of inventory
 Other costs incurred in bringing the inventories to their (c) Obsolescence of products
present location and condition (d) A decision as part of the company’s marketing strategy to
manufacture and sell products at a loss
(e) Errors in production or purchasing

 A write down of inventories would normally take place on

an item by item basis, but similar or related items may be
grouped (e.g. same product line)

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 Financial Accounting and Reporting – Inventories

 The assessment of NRV should take place at the same

time as estimates are made of selling price, using the Goods and Materials to be included in Inventory
most reliable information available. Fluctuations of price
or cost should be taken into account if they relate directly A. Goods in transit
to events after the reporting period, which confirm a. Title passes from the seller to the buyer in the
conditions existing at the end of the reporting period. manner and under the conditions explicitly agreed
 Estimates of net realizable value must also take into upon by the parties.
account the purpose for which the inventory is held. b. If no conditions are explicitly agreed upon ahead of
 Materials and other supplies held for use in the time, title passes from the seller to the buyer at the
production of inventories are not written down below cost time and place where the seller’s performance
if the final product in which they are to be used is regarding delivery of goods is complete
expected to be sold at or above cost. c. FOB means “free on board” and requires the seller
 NRV must be reassessed at the end of each reporting to deliver the goods to the location indicated as FOB
period and compared again with cost. If NRV is more at the seller’s expense.
than the cost, then the previous write down must be
reversed to the extent that the inventory is lower of cost FOB Title passes
and the new NRV. Shipping point When the seller delivers the
 If write down is material, it must be disclosed separately. (FOB Seller) goods to a common carrier.
Destination When the buyer receives the
Estimated selling price xx (FOB Buyer) goods from the common
Estimated direct cost to complete (xx) carrier
Estimated direct cost to sell (xx)
Net realizable value xx B. Shipment of Non-conforming Goods
a. If the seller ships the wrong goods, the title reverts to
the seller upon rejected by the buyer.
b. The goods should not be included in the buyer’s
Special considerations
inventory, even if the buyer possesses the goods
prior to their return to the seller
Output of more than one product
If the costs of converting each product are not separately
C. Sales with a Right to Return
identifiable, they should be allocated between the products on
a. If the amount of the goods likely to be returned
a rational and consistent basis; for example this might be the
cannot be estimated, the goods should be included
relative sales value of each of the products. If the value of the
in the seller’s inventory
by-product is immaterial, it may be measured at net realizable
b. If the amount of goods likely to be returned can be
value and this value deducted from the cost of the main
estimated, the transaction is a sale with an
product.
allowance for estimated returns.
Forward contracts to purchase inventory
D. Consigned goods
The ‘cost of purchase’ represents the forward contract price
Substantial risk and rewards of ownership
adjusted for the derivative asset or liability.
Transferred Not transferred
Consignor Sale Inventory
Purchase commitments Consignee Inventory none
 The purchases are recorded at current market value
 A liability is recorded at the amount committed. E. Public warehouses
 The accrued loss on purchase commitment, if any, is a. The goods are included in the inventory of the
derecognized. company holding the warehouse receipt

Drug production costs within the pharmaceutical industry F. Sales with a Mandatory Buyback
Prior to application of regulatory Research and a. The seller should include the goods in inventory
approval development cost even though title has passed to the buyer
After obtaining regulatory Inventory
approval G. Installment sales
a. If the percentage of uncollectible debts cannot be
Transfers of rental assets to inventory estimated, the inventory should be included in the
The cost is the carrying value of the rental assets at the time seller’s inventory, otherwise, the transaction is a sale
they become held for sale. with an allowance for uncollectible debts

Disclosure requirements Inventory Systems

The financial statements should disclose: Periodic inventory system

(a) the accounting policies adopted in measuring inventories,
including the cost formula used;
(b) the total carrying amount of inventories and the carrying
amount in classifications appropriate to the entity;
(c) the carrying amount of inventories carried at fair value
less costs to sell;
(d) the amount of inventories recognized as an expense
during the period;
(e) the amount of any write-down of inventories recognized
as an expense in the period;
(f) the amount of any reversal of any write-down that is
recognized as a reduction in the amount of inventories
recognized as expense in the period;
(g) the circumstances or events that led to the reversal of a
write-down of inventories; and
(h) the carrying amount of inventories pledged as security for
liabilities.
a. Only revenue is recorded each time a sale occurs
b. Items must be physically counted periodically to
determine quantities on hand
Perpetual inventory system
a. Sales, cost of goods sold and inventories are recorded
each time a sale occurs
b. A record of inventories on hand and sold is maintained
Benefits of a perpetual system:
1. Provides a continuous check and control mechanism on
inventory
2. Facilitates purchasing and production planning
3. Ensures adequate on-hand inventories
4. Helps identify and measure the magnitude of inventory
shrinkage
5. Advances in, and cost reductions relating to, technology
have made perpetual systems’ much more feasible

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 Financial Accounting and Reporting – Inventories

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THEORIES
1. PAS 2 applies to all inventories, except:
a. Work in progress under construction contracts
b. Financial instruments
c. Biological assets related to agricultural activity
d. Agricultural produce after harvest
2. Inventories are defined as:
a. Assets held for sale in the ordinary course of
business, in the process of production for such sale,
or in the form of materials or supplies to be
consumed in the production process or in the
rendering of services
b. Assets held for sale, in the process of production or
in the form of materials or supplies to be consumed
in the production process
c. Tangible assets held for sale in the ordinary course
of business, in the process of production, or in the
form of materials or supplies to be consumed in the
production process or in the rendering of service
d. Land or building held to earn rentals or for capital
appreciation or both
3. The cost of inventory is the sum of:
a. Costs of purchases and costs of conversion
b. Direct cost, indirect costs, and allocated production
overheads
c. Costs of purchase, costs of conversion and other
costs in bringing the inventory to their present
location and condition
d. Costs of purchases only
4. Costs of conversion inventories do not include:
a. Direct labor
b. Fixed factory overhead
c. Variable factory overhead
d. Direct materials
5. The following are costs excluded from the cost of
inventories, except
a. Abnormal amounts of wasted materials, labor, or
other production costs
b. Storage costs unless those costs are necessary in
the production process before a further production
stage
c. Import duties and unrecoverable taxes
d. Administrative overheads that do not contribute to
bringing inventories to their present location and
condition
6. Which statement is incorrect regarding techniques for the
measurement of cost of inventories?
a. Techniques for the measurement of the cost of
inventories may be used for convenience if the
results approximates cost
b. Standard costs take into account normal levels of
material and supplies, labor, efficiency and capacity
utilization
c. The retail method is often used in the retail industry
for measuring inventories of large numbers of rapidly
changing items with similar margins for which it is
impracticable to use other costing methods
d. None of the above
7. Which statement is incorrect regarding the retail
inventory method?
a. The retail method is often used in the retail industry
for measuring inventories of large numbers of rapidly
changing items with similar margins for which it is
impracticable to use other costing methods
b. The cost of the inventory is determined by reducing
the sales value of the inventory by the appropriate
percentage gross margin
c. The percentage used does not take into
consideration inventory that has been marked down
to below its original selling price
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Financial Accounting and Reporting – Inventories
d. An average percentage for each retail department is
often used.
8. Which statement is incorrect regarding cost formulas?
a. Specific identification of cost means that specific
costs are attributed to identified inventory
b. The FIFO formula assumes that the items of
inventory that were purchased or produced last are
sold first, and consequently the items remaining in
inventory at the end of the period are those earlier
purchased or produced.
c. Under the weighted average cost formula, the cost of
each item is determined from weighted average of
the cost of similar items purchased or produced
during the period
d. The average cost formula may be calculated on a
periodic basis, or as each additional shipment is
received, depending upon the circumstances of the
entity
9. The gross profit method of estimating ending inventory
may be used for all of the following, except
a. Internal as well as external interim reports
b. Internal as well as external year-end reports
c. Estimate of inventory destroyed by fire or other
casualty
d. Rough test of validity of an inventory cost
determined under the periodic or perpetual system
10. The use of the gross profit method assumes
a. The amount of gross profit is the same as in prior
years
b. Sales and cost of goods sold have not changed from
previous years
c. Inventory values have not increased from previous
years
d. The relationship between the selling price and cost
of goods sold is similar to prior years.
11. ‘Net realizable value’ of inventory is defined as the net
amount that an enterprise expects to realize from the
sale of the inventory
a. In the ordinary course of operations less estimated
costs of completion and costs necessary to make the
sale
b. Plus the estimated costs of completion plus the
estimate costs necessary to make the sale
c. In a forced sale
d. Plus the estimated costs of completion
12. When determining the net realizable value of inventory,
estimates must be made of the following:
I. Estimated costs of completion
II. Expected replacement cost
III. Expected normal profit margin
IV. Estimated selling price
a. I, II, III, and IV
b. I, II, and III only
c. I and IV only
d. I, III, and IV only
13. Which of the following represents the best justification for
valuing the inventories at the lower of cost and net
realizable value?
a. It is easier to keep track of market values that it is to
keep track of cost as market value is available from
any supplier
b. Cost loses its relevance for the determination of cost
of goods sold if the cost of inventory has been
incurred in an earlier accounting period.
c. The balance sheet valuation of inventory is the most
important consideration in the preparation of
financial statements
d. The practice of writing inventories below cost to net
realizable value is consistent with the view that
assets should not be carried in excess of amount
expected to be realized from their sale or use.
 Financial Accounting and Reporting – Inventories

14. Net realizable value of inventories that may fall below d. The value of the inventories in the current assets
cost for a number of reasons including: section of the balance sheet remains the same but
I. Product obsolescence the fact of having been pledged a portion of the
II. Physical deterioration of inventories inventories should be disclosed in the financial
III. An increase in the expected replacement costs statements or notes.
of the inventory
IV. An increase in the estimated costs of 21. Examples of costs excluded from the cost of inventories
completion and recognized as expenses in the period in which they
are incurred
a. I, II and IV only I. Storage costs, unless those costs are necessary
b. II, III and IV only in the production process prior to a further
c. I, III and IV only production stage
d. I and II only II. Selling costs
III. Import duties and nonrefundable other taxes
15. Lower of cost or net realizable value is most conservative IV. Abnormal amounts of wasted materials
if applied V. Administrative overheads that do not contribute
a. to the total inventory to bringing inventories to their present location
b. to major categories of inventory and condition
c. to individual items of inventory
d. to major categories for taxes a. I, II, and III only
b. I, II, IV and V only
16. Where the net realizable value of inventory falls below c. I and II only
cost, PAS 2 requires that d. I, II, III, IV, and IV
a. The inventory continue to be carried in the balance
sheet at cost 22. Which of the following costs of conversion cannot be
b. The inventory must be written down to net realizable included in cost inventory
value a. Direct labor cost
c. No adjustment to be made, but the difference b. Factory rent and utilizes
between net realizable value and cost be disclosed c. Salary of sales staff where the sales department
in the notes to the financial statements shares the building with factory supervisor
d. The difference be added to the carrying amount of d. Factory overheads based on normal capacity
the inventory
23. If goods shipped FOB destination are in transit at the end
17. If the selling price of inventory that has been written down of the year, they should be included in the inventory
to net realizable value in a prior period subsequently balance of the
recovers, the a. Seller
a. Previous amount of the write-down can be reversed b. Common carrier
b. Carrying amount of the inventory cannot be adjusted c. Buyer
c. Value adjustment can be recognized immediately in d. Bank
equity
d. Adjustment must be recognized in a provision for 24. Assumes that the items of inventory that were purchased
future inventory write-downs account or produced first are sold first, and consequently the
items remaining in inventory at the end of the period are
18. Which statement is incorrect regarding recognition of those most recently purchased or produced
inventories as expense? a. FIFO
a. When inventories are sold, the carrying amount of b. Weighted average method
those inventories shall be recognized as an expense c. Specific identification
in the period in which the related revenue is d. LIFO
recognized
b. The amount of any write-down inventories to net 25. Which inventory measurement procedure is not allowed
realizable value and all losses of inventories shall be to measure the cost of inventories for annual reporting
recognized as an expense in the period the write- purposes?
down or loss occurs a. Gross profit method
c. The amount of any reversal of any write-down of b. Retail inventory method
inventories, arising from an increase in net realizable c. FIFO
value, shall be recognized as a reduction in the d. Moving average
amount of inventories recognized as an expense in
the period in which the reversal occurs 26. PAS 2 requires that when inventories are written down to
d. None of the above. the net realizable value, they are written down
a. On a class-by-class basis
19. An example of an inventory accounting policy brat that b. On the basis of the industry segment
should be disclosed is the c. On an item-by-item basis
a. Effect of inventory caused by inflation d. According to geographical segment within the entity
b. Classification of inventory into raw materials, work in
process, and finished goods 27. The gross profit method of estimating inventory would not
c. Identification of major suppliers be useful when
d. Method used for inventory costing a. A periodic system is in use and inventories are
required for interim statements
20. When a portion of the inventories has been pledged to b. Inventories have been destroyed or lost by fire, theft,
secure the payment of indebtedness or other casualty, and the specific data required for
a. The fact of a portion having been pledge should be inventory valuation are not available
disclosed in the notes to financial statements c. There is a significant change in the mix of products
b. The value of the portion pledged should be deducted being sold
from the value of the inventories shown in the d. The relationship between gross profit and sales
current assets section on the balance sheet remains stable over time
c. The value of the portion pledged should be
transferred from current assets to noncurrent assets

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 Financial Accounting and Reporting – Inventories

28. Under the retail inventory method, freight in would be PROBLEMS

included in the calculation of the goods available for sale
for which of the following? 1. On January 1, 2017, Boruto accepted an order for 7,000
a. Cost only custom-made corporate gifts.
b. Retail only
c. Both cost and retail On January 3, 2017, Boruto purchased raw materials to be
d. None of the above consumed in the production process for the following:

29. The retail method has been used by a retail department Invoice price P800,000
store during its first year of operations. As of the end of Trade discount 20,000
the year, compare (A) the markdowns with (B) the Import duties 15,000
markdown cancellation Handling cost 10,000
a. A will be equal to B Refundable purchase tax 50,000
b. A will be less than or equal to B
c. A will be greater than or equal to B Boruto funded the purchase price by raising a loan and
d. A cannot be equal to B incurring a loan-raising fee of P15,000. The loan is secured
by the inventories.
30. Entities must allocate the cost of all goods available for
sale between During January 2017, Boruto designed the corporate gifts for
a. The cost of goods on hand at the beginning and the the customer. Stage 1 design costs included:
cost of goods acquired during the period
b. The cost of goods on hand at the end and the cost of Cost of external designer P50,000
goods acquired during the period Labor cost 25,000
c. The income statement and the statement of financial Storage cost necessary for Phase 2 design 5,000
position
d. All of the choices are correct. During February 2017, Boruto’s team developed the
manufacturing technique and made further modifications
31. How should unallocated fixed overhead costs be treated? necessary to bring the inventories to the conditions specified
a. Allocated to finished goods and cost of goods sold in the agreement. The following additional costs were
b. Allocated to raw materials, work in process and incurred in the testing phase:
finished goods
c. Recognized as an expense in the period when Materials P30,000
incurred Proceed from sale of scrapped output 2,000
d. Allocated to work in process, finished goods and Labor cost 25,000
cost of goods sold. Depreciation of machinery used 5,000

32. The use of a discount lost account implies that the
recorded costs of an inventory is
a. Invoice price
b. Invoice price plus the purchase discount lost
c. Invoice price less the purchase discount taken
d. Invoice price less the purchase discount allowable
whether taken or not
33. When a portion of inventory has been pledged as
security on a loan
a. The value of the portion pledged should be
subtracted from the debt
b. An equal amount of retained earnings should be
appropriated
c. The fact should be disclosed but the amount of
current assets should not be affected
d. The cost of the pledged inventory should be
transferred from current to noncurrent assets
2.
34. Variable production overheads are allocated to each unit
of production on the basis of the
a. Normal capacity of the production facilities
b. Actual use of the production facilities
c. Either the normal capacity or the actual use of
production facilities
d. Neither the normal capacity nor the actual use of
production facilities
35. Which of the following statements is true regarding
inventory write-downs and recovery of write-downs?
a. Recovery of inventory write-down is prohibited under
IFRS
b. IFRS requires separate reporting of reversal of
inventory write-down
c. IFRS requires entities to record write-down in a
separate loss account
d. All of the choices are true.
Additional costs were also incurred in manufacturing the
customized corporate gifts
Consumable stores P75,000
Labor cost 80,000
Depreciation of machinery used 20,000
The customized corporate gifts were ready for sale on March
1, 2017. No abnormal wastage occurred in the development
and manufacture of the corporate gifts.
What is the cost of the inventory?
a. P1,138,000
b. P1,140,000
c. P1,118,000
d. P1,120,000
Mitsuki’s inventory on December 31, 2017, the reporting
period, was P6,000,000 based on a physical count of goods
priced at cost and before any necessary year-end
adjustments relating to the following:
 Included in the physical count were goods billed to a
customer FOB shipping point on December 31, 2017.
These goods had a cost of P125,000 and were picked up
by the carrier on January 15, 2018.
 Goods shipped FOB shipping point on December 31,
2017 from a vendor were received on January 15, 2018.
The invoice cost was P300,000.
 Goods sold to a customer on December 31, 2016 which
are being held for the customer to call at the customer’s
convenience with a cost of P200,000 were included in the
count.
What amount should be reported as inventory at the end of
the reporting period?
a. P5,875,000
b. P6,100,000
c. P6,175,000
d. P6,300,000

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 Financial Accounting and Reporting – Inventories

3. On June 1, 2017, Goblin sold merchandise with a list price of d. P12,047,600

P5,000,000 to a customer. Goblin allowed trade discounts of
20% and 10%. Credit terms were 5/10, n/30 and the sale was
made FOB shipping point. The entity prepaid P100,000 of 7. Roger signed a three-year noncancellable purchase contract
delivery cost for the customer as an accommodation. On in Y1, which allows Roger to purchase up to 500,000 units of
June 11, 2017, what is the full remittance from the customer? a computer part annually from Eudora at P10 per unit and
a. P5,875,000 guarantees a minimum annual purchase of 100,000 units.
b. P6,100,000 During Y1, the part becomes obsolete. Roger had 250,000
c. P6,175,000 units at the end of Y1, and believes these parts can be sold at
d. P6,300,000 P2 per unit. The loss on purchase commitment to be reported
at Y1 is?
4. Elle reported accounts payable of P2,200,000 on December
31, 2017 before considering the following: a. P2,400,000
 Goods shipped to the entity on December 31, 2017 FOB b. P2,000,000
shipping point were lost in transit. The invoice cost of c. P1,600,000
P40,000 was not recorded. On January 15, 2018, the d. P800,000
entity filed a P40,000 claim against the common carrier.
 On December 31, 2017, a vendor authorized the entity to 8. A fire destroyed the New Jersey Company’s warehouse
return for full credit goods shipped and billed at P70,000 causing damage to its inventories stored in the warehouse.
credit memo was received and recorded by the entity on The company uses average retail inventory method in
January 15, 2018. inventory estimation. In connection with this, the company’s
accountant gathered the following information relating its
 On December 31, 2017, the entity has a P550,000 debit
inventories:
balance in accounts payable to a supplier resulting from
an advance payment for goods to be manufactured to the
Cost Retail
entity’s specification.
Beginning inventory 190,000 300,000
Purchase Price 2,900,000 4,000,000
The amount to be reported as accounts payable as of Purchase discount 50,000 100,000
December 31, 2017 is? Purchase allowance 90,000 150,000
Purchase returns 60,000 120,000
a. P2,170,000 Freight in 20,000 30,000
b. P2,680,000 Net Mark-up - 60,000
c. P2,730,000 Net Mark-down - 80,000
Transfer in 386,800 430,000
d. P2,670,000 Transfer out 400,000 550,000
Abnormal wastages 80,000 120,000
5. Joy’s closing inventory at year-end amounted to P284,700. Normal Wastages 100,000 120,000
The following were included at cost in the total: Employee discounts 6,000 9,500
 400 coats, which had cost P80 each and normally sold Sales discount 5,000 8,200
for Sales Allowance 21,000 32,150
P150 each. Owing to a defect in manufacture, they were Sales return 5,000 6,780
all sold after the reporting date at 50% of their normal
The company’s policy is to record sales adjustment directly to
price. Selling expenses amounted to 5% of the
sales account. The sales account showed ending balance of
proceeds.
P2,908,000 on the date of fire. Physical inventory conducted
 800 skirts, which had cost P20 each. These too were after the fire disclosed unusable damaged goods which the
found to be defective. Remedial work were incurred company estimates can be sold at P100,000. Also, it is
during the year at P5 per skirt and selling expenses for estimated that the company will incur P4,000 to sell the
the batch totaled P800. They were sold for P28 each. goods. The original cost of this goods amounted to P50,000.

What should the inventory value be according to PAS 2 The amount to be recognize as loss on inventory fire is?
Inventories after considering the above items?
a. P556,348
b. P581,613
a. P281,200
c. P585,400
b. P282,100
d. P611,875
c. P282,800
d. P329,200 Use the following information for the next two questions.

6. Hilda bought a 10 hectare land to be improved, subdivided Zhao Yun is a wholesaler of office supplies. The activity for
into lots, and eventually sold. Purchase price of the land was Dragon calculators during August follow:
P58,000,000. Taxes and documentation expenses on the
transfer of the property amounted to P800,000. The lots were Date Transaction Units Cost
classified as follows: 1 Beginning 2,000 P36.00
7 Purchase 3,000 37.20
Lot Number Selling price Total clearing
12 Sales 3,600
clas of lots per lot costs
21 Purchase 4,800 38.00
s
22 Sales 3,800
A 10 1,000,000 None
29 Purchase 1,600 38.60
B 20 800,000 1,000,000
C 40 700,000 3,000,000
What is the ending inventory at August 31?
D 50 600,000 8,000,000

Purchase and improvement costs allocated for class B lots 9. Using FIFO perpetual inventory system
under the relative sales value method of inventory valuation a. P152,288
are: b. P152,960
c. P150,080
a. P13,485,700 d. P150,160
b. P10,800,000
c. P12,200,000 10. Using weighted average cost periodic inventory system

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 Financial Accounting and Reporting – Inventories

a. P146,400
b. P152,960
c. P150,080
d. P150,160

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