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Chapter 7 - Inventories - Ia Part 1a
Chapter 7 - Inventories - Ia Part 1a
Inventories
6. Solutions:
Cost of inventory Net cash payment
Scenarios: on Dec. 31 on Jan. 5
a. FOB Destination,
Freight prepaid None 100,000
b. FOB Shipping point,
Freight collect 106,000 100,000
c. FOB Destination,
Freight collect None 94,000
d. FOB Shipping point,
Freight prepaid 106,000 106,000
7. D
8. C – memo entry
9. D
1
10. Solution:
Accounts
Inventory
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
12. Solution:
a. Inventory on 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
13. A
14. A
15. C
16. D
17. Solutions:
Requirement (a):
2
(b)
Inventory 25,000 Freight-in 25,000
Cash 25,000 Cash 25,000
(c)
Accounts payable 10,000 Accounts payable 10,000
Inventory 10,000 Purchase returns 10,000
(d)
Accounts receivable 800,000 Accounts receivable 800,000
Sales 800,000 Sales 800,000
(e)
Sales returns 9,000 Sales returns 9,000
Accounts receivable 9,000 Accounts receivable 9,000
Requirement (b):
Perpetual system
Sales 800,000
Sales
returns (9,000)
Net sales 791,000
3
Periodic system
Sales 800,000
Sales returns (9,000)
Net sales 791,000
Cost of sales:
Beginning inventory 20,000
Net purchases 465,000
Total goods avail. for sale 485,000
Ending inventory (109,275) (375,725)
Gross profit 415,275
18. D
19. B
20. D
21. D
22. E
23. Solution:
24. Solution:
4
Accounts payable 144,000 Accounts payable
136,800
*(₱200,000 x 80% x 90%)
*(₱200,000 x 80% x 90% x 95%)
*(144K x ½)
25. C
26. D
27. Solutions:
Unit Total
Units cost 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
5
COGS 207,000
OR
Unit
Units Total Cost
Cost
Balance at January 1,
3,000 19.55 58,650
2002
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
6
COGS 207,805
28. C
29. Solution:
Requirement (a):
Product
Product B Product C Total
A
Purchase price 100,000 250,000 300,000
Freight-in 12,000 30,000 36,000
Cost 112,000 280,000 336,000
Requirement (b):
Product B: (280,000 – 225,000) = 55,000
7
PROBLEM 3: EXERCISES
1. Solution:
Unadjusted
balance 260,000
(a) 11,000
(b) 5,000
(c) (16,000)
(d) 20,000
(e) (4,000)
Correct inventory 276,000
2. Solution:
(a) Inventory (140,000 x 98%) 137,200
Accounts payable 137,200
3. Solution:
June 11 Purchases (.98 × ₱9,000) 8,820
Accounts Payable 8,820
15 Accounts Payable (.98 × ₱1,000) 980
Purchase Returns and Allowances 980
30 Purchase Discounts Lost (.02 × ₱8,000) 160
Accounts Payable 160
4. Solution:
Requirement (a):
8
Purchases 196,000
Accounts Payable 196,000
(.98 × ₱200,000 = ₱196,000.)
Requirement (b):
Gross Allocation of
amts. discount Net amounts
EI (200K x 10%) 20,000 - 20,000
COGS (200K x 90%) 180,000 3,200 176,800
Total 200,000 3,200
Gross Allocation of
amts. discount Net amounts
EI (200K x 10%) 20,000 320* 19,680
COGS (200K x 90%) 180,000 2,880* 177,120
9
Total 200,000 3,200
5. Solutions:
In In
units Unit cost pesos
Ending inventory 1,000
Allocation to June 24
purchase (700) 30 21,000
Excess allocated to June 14
purchase 300 35 10,500
Ending inventory, in pesos 31,500
⮚ TGAS, in pesos:
Unit
Date Transaction Quantity Cost In pesos
Purchase
14 800 35 28,000
Purchase
24 700 30 21,000
TGAS, in pesos
82,600
10
Cost of goods sold 51,100
Unit
Date Transaction Quantity Cost In pesos
June 1 Balance 1,400 24 33,600
8 Sale 400 24 (9,600)
14 Purchase 800 35 28,000
18 Sale 900 24 (21,600)
24 Purchase 700 30 21,000
29 Sale 600
100 from June 1 24 (2,400)
500 from June 14 35 (17,500)
Ending inventory 31,500
11
Requirement (d): Weighted average perpetual
Unit
Date Transaction Quantity Cost In pesos
June 1 Balance forwarded 1,400 24 33,600
8 Sale (400) (9,600)
Purchase 800
14 35 28,000
Totals 1,800 28.89 52,000
Sale (900)
18 (26,001)
Purchase 700
24 30 21,000
Totals 1,600 29.37 46,999
Sale (600)
29 (17,622)
Ending inventory 1,000 29,377
6. Answers:
Net
Inventory, beg. purchases Cost of sales Inventory, end.
a. 10,000 198,000 112,000 96,000
b
. 36,000 145,000 125,000 56,000
c. 15,000 58,000 64,000 9,000
d
. 25,200 112,000 89,200 48,000
12
13
PROBLEM 4: CLASSROOM ACTIVITIES
ACTIVITY #1:
Solutions:
(a) The term of sale is FOB SHIPPING POINT. Indicator: the freight is
chargeable to ABC Co. (COD – CASH ON DELIVERY).
(a)
The date of the Bill of Lading – shipment date.
(b)
Purchase price net of VAT ₱7,589.29 + Freight (₱900.00 bill of lading +
₱200.00 porter fee) = ₱8,689.29 cost of purchase
ACTIVITY #2:
Solutions:
1. Compute for the following using the Specific Identification method:
a. Cost of goods sold ₱7.00 – the cost of item “broken”
b. Ending inventory ₱11.75
3. Compute for the following using the Weighted Average Cost method:
a. Cost of goods sold (₱5.75 + ₱6.00 + ₱7.00) ÷ 3 = ₱6.25
b. Ending inventory (₱5.75 + ₱6.00 + ₱7.00) - ₱6.25 = ₱12.50
14
15
PROBLEM 5: THEORY
1. B
2. B
3. B
4. C
5. B
6. B
7. D
8. B
9. A
10. C
11. D
12. A
13. D
14. A
15. A
16. A
17. A
18. C
19. C
20. D
16
PROBLEM 6: MULTIPLE CHOICE: COMPUTATIONAL
1. A
5. A
Solution:
Inventory
160,00
beg. 0 10,000 Purchase Disc.
Purchase 530,00 465,00 COGS
s 0 0 (squeeze)
215,00
0 end.
6. A
Solution:
Inventory
30,00
beg. 0
Purchase 40,00 Purchase Ret. and
s 0 5,000 Allow.
Freight-In 5,000 4,000 Purchase Disc.
51,00
0 COGS
15,00
0 end.
7. C
Solution:
beg. 35,000
Purchases 35,000
Freight-In 5,000
Purchase Ret. and
Allow. (2,000)
17
8. D
Solution:
TGAS 55,000
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. D
Solution:
Balance/Transactio
Date Units Cost
n
Aug. ₱36.0
Inventory 2,000
1 0
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
Unit Total
Units
cost cost
Ending inventory 4,000
From Aug. 29
purchase (1,600) 38.6 61,760
Balance 2,400
18
From Aug. 21
purchase (2,400) 38 91,200
As allocated - 152,960
Dat
Balance/Transaction Units
e
1-Ju
Inventory 2,000
l
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
13. C
Solution:
Dat
Transaction Units Cost Total cost
e
1-Ju
Inventory 2,000 72,000
l 36.00
7 Purchase 3,000 111,000
37.00
19
Total 5,000 36.60 183,000
12 Sales
(3,600) 36.60 (131,760)
21 Purchase 5,000 189,400
37.88
14. A
Solution:
Ending inventory in units is computed as follows:
Units
beg. 10
January 6 Purchase 4
20
Unit Unit Total
s cost cost
Ending inventory 10
From Jan. 25
purchase (4) 30.0 120
Balance 6
From Jan. 15
purchase (6) 30 180
As allocated - 300
15. A
Solution:
Average EI 252.00
Average EI (252)
COGS 378
16. C
Solution:
Total goods available for sale is computed based on information
under LIFO as follows:
Cost of goods sold (LIFO)
195,000
Ending inventory in pesos (LIFO)
45,000
21
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
240,00 240,00 extended from
TGAS in pesos
0 0 LIFO
(45,000 (65,000
Ending inventory in pesos
) ) given information
195,00 175,00
Cost of goods sold
0 0 squeezed
22