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MANUEL L. QUEZON UNIVERSITY ​ ​ School of Accountancy and Business Arts

Integrated Review in Theory of Accounts and Practical

Accounting 1

Day

4

1. A retailer imported goods at a cost of P 260,000, including

P 40,000 non-refundable import duties and P 20,000 refundable purchase taxes. The risks and rewards of ownership of the imported goods were transferred to the retailer upon collection of the goods from the harbor warehouse. The retailer was required to pay for goods upon

collection. The retailer incurred P10,000 to transport the goods to its retail outlet and a further P 4,000 in delivering the goods to its customer. Further selling costs of P 6,000 were incurred in selling the goods. What amount should the inventory be valued?

a. P 240,000

b. P 250,000

c. P 260,000

d. P 270,000

2. The inventory on hand at December 31, 2014 for Conrad Company is valued at a cost of P947,800. The following

items were not included in this inventory amount:

A. Purchased goods in transit, shipped FOB destination.

Invoice price-P 32,000, which includes freight charges of P 1,600.

B. Goods held on consignment by Conrad at a sales price of P 28,000, including sales commission of 20% of the sales price.

C. Goods sold to Ube Company, under terms FOB

destination, invoiced for P 24,400 which includes P 1,000 freight charges to deliver the goods. The goods are in transit.

D. Purchased goods in transit, terms FOB shipping point. Invoice price-P 48,000. Freight costs P 3,000

E. Goods out on consignment to Can Company, sales price, P 36,400. Shipping cost of P2,000.

Mark-up on cost for sales is 30%.

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What is the correct cost of inventory to be reported in Conrad’s financial statement?

a. P 1,022,400

b. P 1,041,800

c. P 1,046,800

d. P 1,078,800

3. Power Company reviewed its year-end inventory and found the following items:

A. A package containing a product costing P 81,600 was standing in the shipping area when the physical inventory was conducted. This was not included in the

inventory because it was marked “Hold for the shipping instructions “. The purchased order was dated December 19 but the package was shipped and the customer was billed January 2, 2015.

B. A special machine, fabricated to order for a particular customer, was finished and in the shipping room on Dec. 30, 2014. The customer was billed on that date and the machine was excluded in the inventory. The machine was costing P 230,000 was shipped Jan. 2,

2014.

C. Merchandise costing P 23,500 was received on

January 3, 2015 and the related purchase invoice was recorded January 5, 2015. The invoice showed the shipment was made December 29, 2014, FOB destination.

D. Goods costing P 150,000 were sold and delivered on Dec. 20, 2014. The sale was accompanied by a repurchase agreement that Power will “buyback” the inventory in February 2015.

How much is the inventory adjustment on December 31,

2014?

a. P 81,600 increase

b. P 231,600 increase

c. P 461,600 increase

d. P 485,999 increase

4. Marker Company has the following information pertaining

to its merchandise inventory as of December 31, 2014:

Inventory on hand (including merchandise received

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on

consignment

 

of

P

20,000)

 

P 200,000

Inventory

 

purchased

 

with

a

buyback

agreement

 

100,000

 

Merchandise in transit, FOB, shipping point,

 
 

including

 

P

5,000

freight

Merchandise in transit, Free alongside, including

cost

155,000

 

delivery

cost alongside the vessel of P 6,000

 

but

excluding

 

the

cost

of

shipment

of

P

3,000

250,000

 

Merchandise in transit, CIF (including insurance costs

 
 

and

freight

of

P

8,000)

 

175,000

 

What amount should Marker Company report as value of its inventory in its 2014 statement of financial position?

a. P 749,000

b. P 757,000

c. P 763,000

d. P 857,000

5. The accounting records of Token Company show the

following information For 2014:

In store

​ Inventory, December 31 ​ ​ ​ P ​ 290,000 ​ Inventory, January 1 ​
Inventory,
December
31
P ​
290,000
Inventory,
January 1
220,000
Purchases
960,000
Freight
in
20,000
Freight
out
60,000
Out on consignment
Inventory,
December
31
P ​
40,000
Inventory,
from consignor
January 1
24,000
Shipment
120,000
Freight
out to consignees
10,000
Freight
out
16,000

What would be the cost of sales of Token for 2014?

a. P 904,000

b. P 970,000

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c. P 1,014,000

d. P 1,024,000

6. On March 1, 2014, Good Company purchased a tract of land for P 18,000,000. Good incurred additional cost of P

4,500,000 during the remainder of year 2014 in preparing the land for sale. The land was subdivided into residential lots as follows:

Lot Class Number of Lots Sales Price per Lot

A ​ ​ 100 ​ ​ ​ P 240,000 B ​ ​ 100 ​ ​
A
100
P 240,000
B
100
160,000
C
200
100,000

Using the relative sales value method, how much should be allocated to Class A lot?

a. P

b. P 8,640,000

c. P

d. P 10,800,000

7,200,000

9,000,000

7. On June 1, 2014, Pitt Corp. sold merchandise with a list

price of P 50,000 to Bull on account. Pitt allowed trade discounts of 30%, 20% and 10%. Credit terms were 2/15, n/40 and the sale was made FOB destination. Bull paid P 2,000 of delivery costs. On June 12, 2014, how much did Pitt receive from Bull as full payment?

a. P 22, 696

b. P 24,696

c. P 26,656

d. P 26,696

Question 8 and 9: Light Company is a wholesaler of scented candles. The activity for item number 1234 during June is presented below:

Date

Transaction

Units

Cost

 

June

6,000

01

Inventory

P 20.00

balance

 

04

Purchases

9,000

24.00

 

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12 ​ ​ Sales ​ ​ ​ ​ 10,800 ​ ​ 19 ​ ​ Purchases
12
​ Sales
10,800
19
​ Purchases
14,400
26.00
22
​ Sales
11,400
29
Purchases
4,800
​ 27.00

8. Under the FIFO periodic inventory system, how much is the ending inventory of item #1234 at June 30?

a. P 280,800

b. P 278,400

c. P 302,400

d. P 316,800

9. Under the weighted average cost periodic inventory system, how much is the ending inventory of item #1234 at June

30?

a. P 278,400

b. P 294,720

c. P 302,400

d. P 316,800

10. During January 2014, Metro Company, which maintains a

perpetual

information pertaining to its inventory:

inventory

system, recorded the following

Unit ​ ​ Total ​ Units Units ​ ​ Cost ​ ​ Cost ​ ​
Unit
Total
Units
Units
​ Cost
Cost
on
Hand
Balance
on
01/01/14
​ 1,000
P ​
40
1,000
Purchased
​ P 40,000
on
01/04/14
​ 600
P ​
120
​ P 72,000
1,600
Sold
on
01/20/14
​ 900
700
Purchased
01/25/14
​ 400
P ​
Under the moving-average method, what amount should
Metro report a inventory at January 31, 2014?
200
on
​ P 80,000
1,100

a. P 105,600

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b. P 129,000

c. P 132,000

d. P 156,000

11. The Moonlight Corporation applies the lower of cost or

net realizable value (NRV) inventory. Data regarding the items in work-process inventory are shown below:

Shorts ​ ​ Pants Historical cost ​ P ​ 90,000 ​ ​ ​ ​ ​
Shorts
Pants
Historical cost
P ​ 90,000
P
56,640
Selling
price
108,800
108,000
Estimated
cost
to
complete
14,400
20,400
Replacement
cost
50,400
95,400
Normal
profit
margin
as
a percentage of selling
price
25%
10%

Under the lower of cost or NRV rule, the pants should be valued at –

a. P 76,800

b. P 87,600

c. P 90,000

d. P 95,400

12. The closing inventory of gender Company amounted to P

284,000 at December 31, 2014. This total includes two

inventory

lines

about which the inventory taker is

uncertain.

Item 1 – 500 items which had cost P15 each and which were included at P 7,500. These items were found to

have been defective at the balance sheet date. Remedial work after the balance sheet date cost P 1,800 and they were then sold for P20 each. Selling expenses were P

400.

Item 2 – 100 items that had cost P10 each but after the balance sheet date, these were sold for P8 each with selling expenses of P 150.

What

figure

should

appear

in

Gender’s

statement

of

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financial position for inventory?

a. P 283,650

b. P 283,950

c. P 284,000

d. 284,300

13. During 2014, Time Company signed a non-cancelable

contract to purchase 1,000 sacks of rice at P900 per sack with delivery to be made in 2015. On December 31, 2014, the price of the rice had fallen to P850 per sack. On May 9, 2015, the Company accepts delivery of rice when the price

is P880 per sack. In the December 31, 2014 statement of comprehensive income, what amount of loss on purchase commitment should be included?

a. None

b. P 20,000

c. P 30,000

d. P 50,000

14. The Classic Company sells Product A. During the year, the company moved to a new location, the inventory

records for Product A were misplaced. The bookkeeper has been able to gather some information from the sales records and gives you the data shown below:

July sales: ​ 57,200 units at P100 July purchases: ​ Date ​ ​ Quantity ​
July sales:
57,200
units at P100
July purchases:
​ Date
​ Quantity
Unit
Cost
July
5
​ 10,000
​ P65.00
9
​ 12,500
62.50
12
​ 15,000
60.00
23
​ 14,000
62.00

On July 31, 16,000 units were on hand with a total value of P 988,000. Classic has always used a periodic FIFO inventory costing system. Gross profit on sales for July was P2,058,750. What is the total cost and unit cost, respectively, of the beginning inventory?

a. P 1,345,400 and P62.00

b. P 1,353,538 and P62.38

c. P 1,367,100 and P63.00

d. P 1,450,000 and P66.82

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15. On the eve of June 15, 2014, a fire destroyed the entire merchandise inventory of Chronic Merchandising Corporation. The merchandise was not insured with any insurance company. The following data were gathered:

Inventory, January 1

 

15

Purchases,

January

1

to

June

1,500,000

Sales January 1 to June 15

 

2,000,000

Markup percentage on cost

 

25%

What is the approximate inventory loss as a result of the fire?

a. P 150,000

b. P 250,000

c. P 312,500

d. P 500,000

16. The following information appears in Davila Company’s

records for the year ended December 31, 2014:

Inventory, January 1, P 325,000; Purchases, P 1,150,000; Purchase returns, P 40,000; Freight in, P 30,000; Sales, P 1,700,000; Sales discounts, P 10,000; Sales returns, P15,000 On December 31, the company conducted a physical inventory which revealed that the ending inventory was only P 210,000. Davila’s gross profit on net sales has

remained constant at 30% in recent years. Davila suspects that some inventory may have been pilfered by one of the company’s employees. How much is the estimated cost of missing inventory on December 31?

P

b. P

c. P 210,000

75,500

82,500

a.

d. P 292,500

17. On December 24, 2014, a fire destroyed totally the raw

materials bodega of Weary Manufacturing Co. there were no purchases of raw materials from the time of the fire until December 31, 2014. Inventories ​ ​ Jan. 1, 2014 Dec. 31,

2014

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Raw materials Factory supplies Goods in process Finished goods ​ ​ P 180,000 ​ ​
Raw materials
Factory supplies
Goods in process
Finished goods
​ P 180,000
? ​
12,000
P
10,000
370,000
420,000
440,000

450,000

The accounting records show the following data:

Sales

Purchased

of raw materials

P

2,400,000

800,000

Purchases

of factory supplies

 

60,000

Freight

in raw materials

30,000

Direct

labor

440,000

Manufacturing overhead, 75% of direct labor; gross profit rate, 35% of sales.

What is the cost of the raw materials destroyed by the fire?

a. P 130,000

b. P 150,000

c. P 160,000

d. P 222,000

18. On September 15, 2015, a fire destroyed a significant portion of the merchandise inventory of Peso Wholesale Corporation. The following information was available from the records of the company:

January 1, 2015 to Date of Fire ​ ​ 2014 ​ Sales ​ ​ P
January 1, 2015
to Date of Fire
2014
Sales
P ​ 530,180
P
450,200
Sales returns and allowances
5,100
Purchases
5,980
378,245
Purchase returns and allowances
​ 405,476
10,295
11,110
Beginning
inventory
105,650
​ 120,160
The
company
determined
the cost of inventory not

damaged to be P 69,738. Damaged merchandise, which cost P 15,000, had an estimated realizable value of P 5,000. What is the estimated fire loss on September 15, 2015?

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a. P 51,684

b. P 61,684

c. P 66,684

d. P 74,738

19. Sultan Co. uses the retail inventory method to estimate its inventory for interim statement purposes. Data relating to

the inventory computation at June 30, 2014 are as follow:

COST ​ ​ RETAIL Inventory, January 1 ​ ​ P 820,000 ​ P ​ 1,262,800
COST
​ RETAIL
Inventory,
January
1
​ P
820,000
P ​
1,262,800
Net
purchases
2,280,000
3,607,200
Net mark-ups
450,000
Net
markdowns
320,000
Sales
4,350,000
Sales returns
300,000
Employee
discount
100,000
Sales discount
Normal shrinkage
80,000

50,000

What is the estimated cost of June 30, 2014 inventory using the average approach?

a. P 466,000

b. P 496,000

c. P 616,000

d. P 800,000

20. The Bony Department store uses a calendar year and the

FIFO retail inventory method (assuming stable prices). Information relating to the computation of the inventory at

December 31 is as follows:

COST ​ RETAIL ​ Inventory, January 1 ​ ​ ​ ​ P 320,000 P ​
COST
RETAIL
Inventory,
January
1
​ P 320,000
P ​
800,000
Sales
5,800,000
Purchases
​ 2,100,000
6,000,000
Freight-in
70,000
Net markups
400,000

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Net markdowns

200,000

What is the ending inventory at cost at December 31 using

the FIFO retail inventory method?

a. P 420,000

b. P 430,000

c. P 440,000

d. P 460,000

21. Presented below is information related to Carnation, Incorporation;

Cost ​ ​ ​ Retail Inventory, January 1, 2014 ​ ​ ​ P ​ 250,000
Cost
Retail
Inventory,
January
1,
2014
P ​
250,000
P ​
390,000
Purchases
914,500
1,460,000
Purchase
returns
60,000
80,000
Purchase
discounts
18,000
-0-Gross
sales
(after
employee
discounts) ​ ​ -0- ​ ​ ​ 1,260,000 Sales returns ​ ​ ​ ​ ​
discounts)
-0-
1,260,000
Sales returns
-0-
97,500
Markups
-0-
120,000
Markup
cancellations
-0-
40,000
Markdowns
-0-
45,000
Markdown
cancellations
-0-
20,000
Freight-in
79,000
-0-
Employee discounts granted
-0-
8,000
Loss
from
breakage
Assuming that Carnation, Inc. uses the conventional retail
inventory method, how much would be the cost of its
ending inventory at December 31, 2014?
-0-
2,500

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a. P 365,085

b. P 391,200

c. P 410,760

d. P 420,280

Question 22-24: Solo Company acquired forest assets for a

lump sum amount of P 20,000,000 which is equal to the

lump sum value of the group of assets

purchase the company is unable to determine the fair value

of the trees separately since no active market was clearly available. The other assets in the group had determinable fair value. The forest assets are listed below and their related fair value less point of sell costs:

at

the time of

Land under trees Roads in forest ​ ​ ​ 2,000,000 ​ ​ ​ ​ 1,000,000
Land under trees
Roads in forest
2,000,000
1,000,000

22. What amount should the biological asset be initially recorded?

1,000,000

b. P 2,000,000

c. P 17,000,000

d. P 19,000,000

a. P

23. What amount should the non-current non-depreciable asset be initially recorded?

1,000,000

b. P 2,000,000

c. P 17,000,000

d. P 19,000,000

a. P

24. What amount should the non-current depreciable asset be initially recorded?

a. P 1,000,000

b. P

c. P 17,000,000

d. P 19,000,000

Question 25 and 26: Central Farm Corporation reported the

following lists of biological assets and agricultural produce for the year ended December 31, 2014:

2,000,000

​ Assets ​ ​ ​ ​ ​ Fair value ​ Dairy cattle ​ ​ ​
Assets
Fair
value
Dairy
cattle
P 3,000,000
Beef cattle
5,000,000
Sheep
2,000,000

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​ Calves on dairy cattle ​ ​ ​ 1,000,000 ​ Calves on dairy cattle ​
Calves on dairy cattle
1,000,000
Calves on dairy cattle
1,500,000
Lambs
Milk
on dairy cattle
800,000
500,000
Carcass
on beef cattle
600,000
Wool
400,000

25. What amount of biological asset should Central Farm

Company report in its December 31, 2014 statement of financial position?

a. P 8,000,000

b. P 10,000,000

c. P 13,300,000

d. P 14,800,000

26. What amount should Central Farm Company report as

inventory related to the above biological assets?

a. P

500,000

b. P

600,000

c. P 1,100,000

d. P 1,500,000

27. Vortex Company’s standing cane fair value as of January

1,

2014 was P 2,700,000 and as of December 31, 2014 was

P

2,250,000. The fair value of the agricultural produce

harvested

respective dates of harvest. What net amount of gain or loss should Vortex Company report in its December 31, 2014 profit or loss related to the biological asset and agricultural produced?

a. None

b. P

c. P 1,650,000

d. P 2,100,000

Question

the following

information pertaining to its biological assets for the year

2014:

A herd of 100, 2-year old animals was held at January 1,

2014. Ten animals aged 2.5 years were purchased on July

1, 2014 for P 5,400 and ten animals were born on July 1,

2014. No animals were sold or disposed of during the

period. Per unit fair values less estimated point-of-sale

P 2,100,000, on the

during

the

period

was

550,000

28-30:

rainbow

Company

has

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costs were as follows:

2.0-year old animal at January 1, 2014 P 5,000

Newborn

 

animal

at

July

1,

2014

3,500

2.5-year

old

animal

at

July

1,

2014

5,400

Newborn

 

animal

at

December

31,

2014

3,600

0.5-year

old

animal

at

December

31,

2014

4,000

 

2.0-year

old

animal

at

December

31,

2014

5,250

 

2.5-year

old

animal

at

December

31,

2014

5,550

 

3.0-year

old

animal

at

December

31,

2014

6,000

28.

How

much of

the increase in

the fair

value of the

biological assets due to price change?

 

a. None

 

b. P 25,000

 

c. P 26,500

d. P 27,500

29.

How

much of

the increase in

the fair

value of the

biological assets due to physical change?

1

a. P

75,000

b. P

79,500

c. P 110,000

d. P 118,500

30. What is the fair value of the biological assets December 31, 2014?

a. P 554,000

b. P 581,500

c. P 700,000

d. P 735,000

as

of

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