(Problem 1) S Company incurred the following costs in connection with its purchase of inventory:

Purchase price based on vendor’s invoices 1,250,000

Trade discounts on purchase already deducted from vendors’ invoices 125,000
Salaries of accounting department 150,000
Brokerage commission paid to agents for arranging imports 50,000
Sales commission paid to sales agents 75,000
After-sales warranty costs 62,500
Import duties 100,000
Freight and insurance on purchases 250,000
Other handling costs relating to imports 25,000

What is the total cost of the purchases?

a. 1,425,000 b. 1,550,000 c. 1,675,000 d. 1,625,000

(Problem 2) X Company incurred the following costs:

Materials 350,000
Irrecoverable purchase taxes 30,000
Abnormal amounts of wasted materials, labor, or other production costs 30,000
Storage costs of finished goods 90,000
Delivery to customers 20,000
Labor 120,000
Administrative overheads unrelated to production 15,000
Variable production overhead 50,000
Factory administrative costs 15,000
Fixed production costs 40,000
Cartage in 8,000
Cartage out 12,000

At what amount should the inventory be measured?

a. 625,000 b. 610,000 c. 598,000 d. 578,000

(Problem 3) J Company incurred the following costs in relation to its merchandise inventory:
1 Items in the warehouse during the count 1,090,000
2 Items out on consignment at another company’s store 70,000
3 Items sold on an installment basis (bad debts can be reasonably estimated) 40,000
4 Items purchased FOB shipping point that is in transit at December 31; 500,000
5 Freight charges on goods purchased above 13,000
6 Items purchased FOB destination that is in transit at December 31; 300,000
7 Items sold to another company, for which the company has signed an agreement to repurchase at a set price that covers
all costs related to the inventory. Total cost of merchandise is 200,000
8 Items sold where large returns are predictable, at cost 30,000
9 Items sold FOB shipping point that is in transit at December 31, at cost 50,000
10 Items sold FOB destination that is in transit at December 31, at cost 75,000
11 Costs incurred to advertise goods held for resale 10,000
12 Items held on consignment from another company at selling price of 150,000 and cost of 100,000
13 Short-term investments in stocks and bonds that will be resold in the near future 125,000
14 Items currently being used for window display 100,000
15 Items on counter for sale 400,000
16 Items on receiving department, refused by the company because of damage 360,000
17 Items included in the count, damaged and unsalable 150,000
18 Items in receiving department, returned by customer, in good condition (not included in the count) 50,000
19 Merchandise inventories out on approval, at cost 100,000
20 Finished special article goods, made to order (included in the count) 78,000
21 Office supplies 40,000

What is the correct amount of inventory?

a. 2,370,000 b. 2,410,000 c. 2,440,000 d. 2,490,000
(Problem 4) M Company’s Accounts Payable balance at December 31, 2020 was 1,800,000 before considering the
following transactions:
I. Goods were in transit from a vendor to M on December 31, 2020. The invoice price was 100,000, and the goods were
shipped FOB shipping point on December 29, 2020. The goods were received on January 4, 2021.
II. Goods shipped to M FOB shipping point on December 20, 2020, from a vendor were lost in transit. The invoice price
was 50,000. On January 5, 2021, M filed a 50,000 claim against the common carrier.

In its December 31, 2020 statement of financial position, M should report Accounts Payable of
a. 1,950,000 b. 1,900,000 c. 1,850,000 d. 1,800,000

(Problem 5) Data relating to consignment transactions during December 2020 of S Company are as follows:
Inventory shipped on consignment to L Company 360,000
Freight paid by S 18,000
Inventory shipped on consignment from K Company 240,000
Freight paid by S 10,000

No sales of consigned goods were made in December 2020. What amount should be included as consigned inventory on
December 31, 2020?
a. 240,000 b. 250,000 c. 360,000 d. 378,000

(Problem 6) On January 2, 2020, N Company purchased inventory with an invoice price of 80,000. The term of the
purchase is 2/10, n/30.

Case 1. Assume that N uses the Gross Method, determine the following:
I. The amount to be debited to purchase on January 2, 2020
a. 100,000 b. 80,000 c. 78,400 d. 98,000

II. The total amount paid assuming the purchase was settled on January 12, 2020
a. 100,000 b. 80,000 c. 78,400 d. 98,000

III. The amount to be credited to Purchase Discount assuming the purchase was settled on January 12, 2020
a. P0 b. 20,000 c. 2,000 d. 1,600

IV. The amount to be debited to Purchase Discount Lost assuming the purchase was settled on January 14, 2020
a. P0 b. 20,000 c. 2,000 d. 1,600

Case 2. Assume that N uses the Net Method, determine the following:
I. The amount to be debited to purchase on January 2, 2020
a. 100,000 b. 80,000 c. 78,400 d. 98,000

II. The total amount paid assuming the purchase was settled on January 12, 2020
a. 100,000 b. 80,000 c. 78,400 d. 98,000

III. The amount to be credited to Purchase Discount assuming the purchase was settled on January 12, 2020
a. P0 b. 20,000 c. 2,000 d. 1,600

IV. The amount to be debited to Purchase Discount Lost assuming the purchase was settled on January 14, 2020
a. P0 b. 20,000 c. 2,000 d. 1,600

(Problem 7) Records of G Company show the following data relative to a product:

Date Details Units Unit Cost Total Cost
April 1 Balance 20,000 10 200,000
April 2 Purchase 30,000 12 360,000
April 4 Sale 25,000
April 10 Purchase 15,000 14 210,000
April 15 Sale 21,000
April 17 Sale Return 1,000
April 28 Purchase 20,000 16.75 335,000

I. Using the weighted average method, how much is the cost of inventory at the end of April?
a. 580,000 b. 605,000 c. 520,000 d. 525,000
II. Using the weighted average method, how much is the cost of goods sold in April?
a. 525,000 b. 500,000 c. 585,000 d. 520,000

III. Using the moving average method, how much is the cost of inventory at the end of April?
a. 580,000 b. 605,000 c. 520,000 d. 525,000

IV. Using the moving average method, how much is the cost of goods sold in April?
a. 525,000 b. 500,000 c. 585,000 d. 520,000

V. Using the FIFO method, how much is the cost of inventory at the end of April?
a. 580,000 b. 605,000 c. 520,000 d. 525,000

VI. Using the FIFO method, how much is the cost of goods sold in April?
a. 525,000 b. 500,000 c. 585,000 d. 520,000

(Problem 8) Y Company entered into a purchase agreement on March 31, 2020, to purchase raw materials. These
materials are to be delivered on April 30, 2021. The company did not actually put these materials into production until
June 30, 2021. The contract price and the market prices for these materials are shown below:
Contract price, 3/31/20 1,200,000
Market price, 12/31/20 1,000,000
Market price, 4/30/21 1,400,000
Market price, 6/30/21 1,600,000

I. How much is to be recognized as loss on purchase commitment on December 31, 2020?

a. P0 b. 200,000 c. 400,000 d. 600,000

II. On April 30, 2021, time of delivery, the company should record the raw materials at
a. 1,200,000 b. 1,000,000 c. 1,400,000 d. 1,600,000

(Problem 9) The following information appears in J Company’s records for the year ended December 31:
Inventory, January 1 650,000 Sales 3,400,000
Purchases 2,300,000 Sales discounts 20,000
Purchase returns 80,000 Sales returns 30,000
Freight in 60,000

On December 31, a physical count revealed that the ending inventory was only 420,000. J’s gross profit on net sales has
remained constant at 30% in recent years. J suspects that some inventory may have been pilfered by one of the company’s
employees. On December 31, what is the estimated cost of missing inventory?
a. 151,000 b. 165,000 c. 420,000 d. 585,000