1.B.

₱ 9,320,000

Cost of purchases based on vendor’s invoice ₱ 7,000,000

Import duties 550,000
Freight and insurance on purchase 1,300,000
Other handling costs relating to imports 200,000
Brokerage commission paid to agents for arranging imports 270,000
Total cost of purchases 200,000
₱ 9,320,000

2. D. ₱ 5,280,000

Physical count ₱ 5,000,000

Goods shipped FOB shipping point on December 30, 2023 to
UNLIBREAKDOWN and received January 10, 2024 280,000
Inventory , December 31, 2023 ₱ 5,280,000

3. C. I, II, and III

4. B. lower of cost and net realizable value

5. C. Perpetual system

6. D. ₱ 432,750

List price ₱ 550,000

Trade discount (₱ 550,000*15%) -82,500
Balance ₱ 467,500
Trade discount (₱ 467,500*10%) -46,750
Invoice price ₱ 420,750
Freight charge 12,000
Total cost of purchase ₱ 432,750
7. A. the entity who owns the goods

8. D. transfer of ownership over inventories may coincide with or follow but never precedes the transfer of physical possession of the goods

9. B. inventories are recognized only when they meet the definition of inventory and they qualify for recognition as assets

10. C. overstate the cost of goods sold

11. D. ₱ 1,046,800

Per count ₱ 947,800

Item C - goods sold in transit, destination
(₱ 24,400 - ₱ 1,000 ÷ 130%) 18,000
Item D - purchases in transit, shipping point
(₱ 48,000 + ₱ 3,000) 51,000
Item E - goods out on consignment
(₱ 36,400 ÷ 130% + ₱ 2,000) 30,000
Correct cost of inventory ₱ 1,046,800

A. Goods purchased FOB (Free on Board) destination, which is in transit, should be included in the inventory of the seller
since title passes to the buyer only when the buyer receives the goods. The company’s inventory is not adjusted since
these goods were not included in its inventory amount.

B. Inventory is not adjusted for goods held on consignment since the consignor owns these goods, even if the consignee
- MAHIRAPPEROKAYA physically holds them.

C. Goods sold FOB Destination that are in transit should be included in the inventory of the seller (MAHIRAPPEROKAYA)
but these goods should be valued at cost (selling price - delivery costs ÷ 130%)

D. Title of the goods purchased FOB Shipping point and are in transit passes to the buyer at the point of shipment and
therefore, should be included in the inventory of the buyer. The cost of the inventory should include the purchase price and freight cost.

E. Goods out on consignment are owned by the consignor (MAHIRAPPEROKAYA) but the inventory should be valued at
cost (selling price ÷ 130% + cost of transferring the inventory to the consignee)

12. A. ₱ 1,024,000

Inventory, Jan. 1 ₱ 224,000

Purchases 1,080,000
Freight-in 20,000
Freight out to consignees 10,000
Cost of goods available for sale ₱ 1,354,000
Less: Inventory, Dec. 31
On hand ₱ 290,000
On consignment 40,000 330,000
Cost of goods sold ₱ 1,024,000

Freight out to consignees is an inventoriable cost while freight out to customer is a delivery expense and is considered
non-inventoriable. Inventory end includes those held by the consignees since the consignor holds title to these goods until sold.

13. B. ₱ 900,000 & ₱ 108,000

Sales ₱ 1,440,000
÷ Mark up on cost 160%
Cost of sales ₱ 900,000

Sales ₱ 1,440,000
Less: Cost of sales -900,000
Gross Profit ₱ 540,000
Less: Selling & Admin Expenses 432,000
Operating Profit ₱ 108,000
14. C. ₱ 9.20
Cost Units
Jan. 1, 2023 Inventory (₱8 x 3,200 units) ₱ 25,600 3,200
Jan. 11, 2023 Issuance (₱8 x 1,600 units) -12,800 -1,600
Balance ₱ 12,800 1,600
Jan. 22, 2023 Purchase (₱9.60 x 4,800 units) 46,080 4,800
Total ₱ 58,880 6,400

Average cost/unit cost (₱ 58,880/6,400) = ₱9.20

15. C. ₱ 131,900

Reported amount of inventory ₱ 116,400

Item one (LCNRV)
Cost (400 x ₱40) ₱ 16,000
NRV (400 x ₱30 - ₱2,000) ₱ 10,000 10,000
Item two (LCNRV)
Cost (200 x ₱30) ₱ 6,000
NRV (200 x ₱35 - ₱1,200-₱300) ₱ 5,500 5,500
Adjusted value of inventory ₱ 131,900

16. A. ₱ 102,600

Inventory, Jan. 1 ₱ 375,000

Add: Purchases, Jan. 1 to Sept. 14 1,385,000
Total goods available for sale ₱ 1,760,000
Less: Estimated cost of sales
(₱2,430,000* x 68%) 1,652,400
Estimated inventory, end ₱ 107,600
Less: Salvage value of damaged inventory 5,000
Inventory loss ₱ 102,600

Accounts receivable, end ₱ 265,000

Add: Collections of receivables 2,115,000
Total ₱ 2,380,000
Less: Accounts receivable, beginning 175,000
Sales on account ₱ 2,205,000
Add: Cash sales 225,000
Total sales ₱ 2,430,000*

17. B. ₱ 316,800

Total units available for sale (beg + purch) ₱ 34,200

Less: Units sold 22,200
Number of units at the end of the month 12,000

FIFO - upward accountability of units

(starting from latest acquisition then upward)

Units Unit cost Cost

From June 19 balance 7,200 x ₱26 ₱ 187,200
From June 29 purchases 4,800 x ₱27 129,600
Ending inventory 12,000 ₱ 316,800

18. D. ₱ 294,720
Units Cost per unit Total Cost
Inventory, beg 6,000 ₱20 ₱ 120,000
Purchases:
June 4 9,000 24 216,000
June 19 14,400 26 374,000
June 29 4,800 27 129,600
Total 34,200 ₱ 840,000

19. B. II only

Lower of cost or market (LCM) is used for financial reporting of inventories. The market value of inventory is defined as
the replacement cost (RC) as long as it is less than the ceiling (net realizable value, or NRV) and more than the floor (NRV
less a normal profit, or NRV – NP). Therefore, if inventory is reported at RC, RC must be less than original cost (meaning
statement I is not correct), and RC must be less than NRV (meaning statement II is correct) and greater than NRV – NP.

20. C. Decrease; Decrease

In a change to LIFO, no recognition is given to any cumulative effect associated with the change because it is usually not
determinable. Thus, the effect on ending inventory and net income is the result solely of current year effects. In a period
of rising prices, LIFO will result in a lower ending inventory amount than FIFO because the earlier lower costs are
assumed to remain in ending inventory. LIFO will also result in a lower net income because the more recent higher costs
are assigned to cost of goods sold.