1.

An inventory method considered as the benchmark or preferable treatment in

accounting for the cost of inventories
FIFO, LIFO, Weighted Average
LIFO, Weighted Average
FIFO, Weighted Average
Weighted average
FIFO
FIFO, LIFO
LIFO

2. The following costs are excluded from the cost of inventories and recognized as
expenses in the period in which they are incurred, except:
Import taxes
None of the choices
Selling costs
Storage costs
Administrative ov

3. An auditor has accounted for a sequence of inventory tags and is now going to
trace information on a representative number of tags to the physical inventory sheets.
The purpose of this procedure is to obtain assurance that:
All inventory represented by an inventory tag is bona fide
Inventory sheets do not include untagged inventory items
The final inventory is valued at cost
All inventory represented by an inventory tag is listed on the inventory sheets

4. Which of the following timing of inventory count is the best based on the auditor’s
point of view?
All of the following are equal
Inventory count just before year-end
Inventory count just after year-end
Inventory count at year-end

5. When a seller ships its inventory to its customer at year-end and the terms are FOB
destination freight collect, then the buyer must remit to the seller
The selling price of the inventory only
The selling price of the inventory plus freight costs
The freight costs only
The selling price of the inventory less freight costs

6. All of the following are part of an entity’s inventory at year-end, except

Inventory sold and still in-transit at year-end, FOB Destination
Inventory held for window display in a company’s store
Goods out on consignment
Finished Goods, made to order by a customer
7. During your audit of a certain company, you have determined that they maintain
subsidiary accounts for its Inventory, particularly Raw Materials, Work in Process and
Finished Goods. The Finished Goods are expected to be sold at above its cost. What
should be the proper valuation of the related Raw materials?
Historical Cost of Raw Materials
Lower of Cost or Net Realizable Value
Replacement Cost
Net Realizable Value

USE THE FOLLOWING FOR NOS. 8-10

8. How much cash was disbursed during 2020 for purchases of merchandise?
P 744,300
P 747,000
P 832,500
P 879,300

9. How much was the cost of goods sold in 2019?

P 693,000
P 828,000
P 792,000
P 742,500

10. How much was the cash collected during 2020 resulting from sales in 2019 and
2020?
P 1,079,600
P 1,079,400
P 1,085,400
P 1,009,800
USE THE FOLLOWING FOR 11-13

11. Raw materials used for the period are

P 50,000
P 90,000
P 70,000
P 80,000

12. How much was the cost of goods manufactured and completed as of May 1,
2019?
P 190,000
P 180,000
P 120,000
P 182,500

13. The work in process inventory destroyed as computed by the adjuster would be:
P 173,500
P 131,500
P 113,500
P 121,500
14. How much is the total cost of purchases?

P1,840,000
P1,800,000
P1,675,000
P1,600,000
USE THE FOLLOWING TO ANSWER 15-16
15. What is the adjusted balance of inventory as of December 31, 2018?
445,000
435,000
455,000
425,000

16. What is the correct amount of net purchases for 2018?

2,445,500
2,412,500
2,432,500
2,455,500

USE THE FOLLOWING FOR 17-18

17. What is the company’s gross profit rate beginning January 1, 2018?
21%
24%
20%
17%

18. How much is the inventory fire loss?

254,000
183,640
146,920
189,400
Use the following to answer 1 and 2

1. How much is the correct Inventory as of December 31? * 296,000

2. How much is the correct Accounts Payable as of December 31? * 208,000
3. How much is the adjusted cost of goods sold? * 4,811,500
4. Compute for the inventory fire loss *

5. Compute for the overstatement or understatement of cost of Sales for 2015. *

(3316)
6. If the company is using a gross profit rate based on cost of 40%, what is the
estimated ending inventory as of the end of the interim period? *

7. How much is the cost of goods sold for 2019? *

8. The company reported inventories at P400,000 as a result of its physical count on
December 31, 2018, what is the amount of estimated ending inventory
shortage/overage as a result of your audit procedures using the FIFO RETAIL
APPROACH? (round off cost% to nearest whole number, eg: xx%) *