Review in Inventory (P1)

A.The orient trading’s inventory at the end of 2016 is P9, 500,000 before considering the following
information. Included in the amount are the following items:

a. Merchandise in transit, purchased FOB shipping point, P680, 000.

b. Merchandise in transit, purchased FOB destination, with invoice cost of P420, 000.
c. Goods held on consignment, P500, 000.
d. Goods out on consignment, at cost plus 50%, markup on cost plus P10, 000 delivery charge,
P610, 000.

The P9, 500,000 balance does not include the following:

e. Merchandise in transit to customers, FOB shipping point, at selling price of P540, 000, which
includes a 40% markup on selling price.
f. Merchandise in transit to customers, FOB destination at selling price of P400, 000 which
includes a 40% markup on selling price.
g. Merchandise purchased in transit, “free alongside”, costing P150, 000.
h. Merchandise sold in transit, “Cost, insurance, freight”. Charge to the buyer, with selling price of
P180, 000 and cost of P120.000.

Required: What is the correct amount of inventory?

B.The physical inventory on December 31, 2016 of Tintin comp. showed merchandise at P172, 000.You
discovered that the following items were excluded from this amount:

a. Merchandise costing P31, 500 shipped by a vendor FOB shipping point on December 31, 2016
and received by Tintin on January 5, 2017.
b. Merchandise costing P40, 000 shipped by a vendor FOB destination on December 30, 2016 and
received by Tintin on January 4, 2017.
c. Merchandise costing P12, 500 which was shipped FOB destination to a customer on December
29, 2016. The customer expected to receive the merchandise on January 6, 2017.
d. Merchandise costing P28, 500 which was shipped FOB shipping point to a customer December
29, 2016. The goods are scheduled to arrive at the destination point on January 2, 2017.

Required: What is the correct of inventory end December 31, 2016 statement of financial position?

C.Mega Company had the following inventory transaction during 2016:

Units Unit Unit Selling

Cost price
Inventory , Jan. 1 250 P10.50
Purchase, March 7 200 P11.00
Purchase, July 15 275 P11.75
Sale, May 20 (120) P14.00
Sale, June 30 (55) P15.00
Sale, Sept. 17 (250) P16.00
Inventory , Dec. 31 300
Determine the following: using FIFO, Weighted average and Moving average

a. Cost of ending inventory

b. Cost of goods sold
c. Gross profit

D.The Mazda Corporation, which was established in 2014 manufactures lubricants used by a car
manufactures. The following data were abstracted from the company’s records:

2014 2015 2016

No. of units produced 13,000 18,000 25,000
No. of units Sold 10,000 16,000 24,000
Production cost per unit P700 P820 P850
Sales for each year:
2014 P12,000,000
2015 P18,800,000
2016 P27,400,000

Required: Determine the amount of gross profit for the year 2014, 2015 and 2016 using:

a. FIFO method
b. Weighted average method applying periodic inventory system

E.Based on a physical inventory taken on December 31, 2016. City Company determine its chocolate
inventory on a FIFO basis at P26, 000. City estimated that, after further processing costs of P12, 000 the
chocolate could be sold as finished candy bars for P40, 000. City normal profit margin is 10% of sales.

Required: Under lower of cost and Net realizable value rule. What is the inventory end to be reported?

F.The following information in available for the Century trading:

Product A B C D
Cost P102 P45 P24 P9
Estimated sales price 120 60 30 15
Estimated disposal cost 15 18 8 5
Number of units 4,000 6,000 5,500 7,200

Required: Using lower of Cost and Net realizable value, what is the Total Inventory Value?

G. Purple comp. had determined its December 31, 2016 inventory on a FIFO basis at P200, 000.
Information pertaining to that inventory as follows:

Estimated selling price P204,000

Estimated cost of disposal 10,000
Normal profit 30,000

Purple records losses that result from applying the lower of cost and net realizable value rule:

Required: What is the amount of Loss that to be recognized?

H.The following information pertains to power blue company at December 31, 2016:

Inventory, January 1 1,400,000

Purchases during the year 6,600,000
Inventory, December 31:
cost 1,200,000
Net realizable value 1,000,000
Prior to 2016, the application for lower of cost and net realizable value never produced a write down in
the company’s inventory to an amount below cost.

Required: What is the cost of goods sold using lower of cost and NRV?

H.On May 6, 2016, a flash flood caused damage to the merchandise stored in the warehouse of Manel
Company. You were asked to submit an estimated of the merchandise destroyed in the warehouse. The
following data were established:

2015 net sales, P8, 000,000 matched against cost of P5, 600,000.

Merchandise inventory, January 1, 2016 was P2, 000,000, 90% of which was in the warehouse and 10%
in downtown showroom.

From January 1, 2016 to date of flood, you ascertained the following: invoice value of purchases (all
stored in the warehouse), P1, 000,000; freight inward, P40, 000; purchase returns, P60, 000.

Cost of merchandise transferred from the warehouse to showroom was P80, 000 and net sales from
January 1 to May 6, 2016(all warehouse stock) was P3, 200,000.

Required: Assuming gross profit rate in 2016 to be the same as in the previous year, what was the
estimated cost of merchandise destroyed by the flood?

I.London Company uses the FIFO retail method of inventory valuation. The following information is
available:

Cost Retail
Beginning inventory P145,000 P160,000
Purchase (net) 283,920 420,800
Additional markups 25,200
Mark up cancellations 9,200
Markdowns 38,100
Markdown cancellations 6,900
Sales revenue 450,000
sales returns 15,200
sales discounts 3,800

Required: What was the estimated cost of ending inventory, using Average cost retail?

J.The retail inventory method is used by Uniwide Sales. The records on inventory, purchases, and sales
for the year 2016 are given below:

Cost Retail
Beginning Inventory 185,700 202,000
Purchases 339,380 458,000
Purchase Allowance 11,000
Freight-in 7,300
Departmental Transfers-in 2,000 3,000
Additional Markups 12,000
Markup Cancellations 2,500
Inventory Shortage 7,000
Sales( Including sales of P4,500 which 374,000
were marked down from P6,000)
Required:

a. Compute the cost of the ending inventory using

1. Average retail method
2. FIFO retail method
b. Compute the cost of goods sold under the two methods in (a)