Problem 1 (10-8)

Myriad Company revealed the following purchase transactions occurred during the last few days of the fiscal
year, which ends December 31, and in the first few days after that date:

1. An invoice for P50,000, FOB shipping point, was received and recorded on December 27. The shipment
was received in satisfactory condition on January 2. The merchandise was not included in the inventory.

2. An invoice for P75,000, FOB destination, was received and recorded on December 28. The shipment was
received in satisfactory condition on January 3. The merchandise was not included in the inventory.

3. An invoice for P30,000, FOB shipping point, was received and recorded on January 4. The invoice showed
that the goods had been shipped on December 28 and the receiving report indicates that the goods had
been received on January 4. The merchandise was excluded from inventory.

4. An invoice for P90,000, FOB shipping point, was received on December 15. The receiving report indicates
that the goods were received on December 18 but across the face of the report is the notation “merchandise
not of the same quality as ordered – returned for credit, December 19”. The merchandise was included in
the inventory.

5. An invoice for P140,000, FOB destination, was received and recorded on January 4. The receiving report
indicates that the goods were received on December 29. The merchandise was included in inventory.

Required:
Prepare the adjustments on December 31. Books are still open.

Problem 2 (11-9)

Narra Company used FIFO cost flow method in measuring raw material inventory.

However, weighted average costs are used in valuing annual incremental layers.

Composition of the December 31, 2020, inventory:

Weighted
Units average unit cost Total cost
Base year inventory 2018 9,000 100 900,000
Incremental layer 2019 3,000 110 330,000
Incremental layer 2020 2,000 125 250,000
Inventory, December 31, 2020 14,000 1,480,000

2021

Mar. 1 4,800 units were purchased at a unit cost of P135 for 648,000.
Sept. 1 7,200 units were purchased at a unit cost of P140 for P1,008,000. A total of 15,000 units were used
for production in 2021.

2022

Jan. 10 7,500 units were purchased at unit cost of P145 for P1,087,500.
May 10 5,500 units were purchased at unit cost of P155 for P852,500.
Dec. 29 7,000 units were purchased at unit cost of P160 for P1,120,000. A total of 16,000 units were used
for production in 2022.

Required:
1. Inventory – December 31, 2021
2. Raw materials used for production during 2021
3. Inventory – December 31, 2022
4. Raw materials used for production during 2022
Problem 3 (11-15)

Solid Company purchased a lot of ground for P18,000,000. The entity also paid an independent appraiser for the
land the amount of P500,000.

The land was developed as residential lots at a total cost of P41,500,000. The lots were classified into three:
Number of lots Sales price per lot
Highland 20 1,000,000
Midland 40 750,000
Lowland 100 500,000

Required:
Compute the total cost of each lot classification.

Problem 4 (12-2)

Prime Company manufactures and sells four products, the inventories of which are priced at cost or net realizable
value whichever is lower. A normal profit of 30% is usually maintained on each product.

The following information is compiled at year-end:

Product Original cost Cost to dispose Est. Selling price Normal selling price
1 700 150 800 700
2 475 205 950 950
3 255 50 300 350
4 450 260 1,000 900

Required:
Determine the unit value for each product applying the lower of cost and net realizable value in measuring
inventory.