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# PROBLEM I

On November 15, 2012, Romina Company entered into a commitment to purchase 100,000 barrels of aviation fuel for P
55 per barrel on March 31, 2013. The entity entered into this purchase commitment to protect itself against the volatility
in the aviation fuel market. By December 31, 2012, the purchase of aviation fuel had fallen to P 50 per barrel. However,
by March 31, 2013, when the entity took delivery of the 100,000 barrels, the price of aviation fuel had risen to P58 per
barrel. What amount should be recognized as gain on purchase commitment for 2013?

PROBLEM II
On October 2012, ABC entered into a noncancelable commitment to purchase on April 1, 2013, 100,000 units of an
inventory item at P 10 each. On December 31, 2012, the cost of the inventory item is P 9.00 per unit. When the actual
purchase is made on April 1, 2013, the cost of the inventory item decreased further to 8.50 per unit.

PROBLEM III

Assume the following data for ABC Merchandising. The company uses the FIFO method of cost allocation.
12/31/2013 12/31/2014 12/31/2015
Cost P 500,000 P 520,000 P 600,000
NRV 480,000 490,000 575,000

Prepare the entries to reflect the valuation at LCNRV using the direct and allowance method assuming the entity is using
the (1) periodic system and (2) perpetual system.

PROBLEM IV
Kath Company‘s accounting records indicated the following for 2012:
Inventory, January 1 5,000,000
Purchases 23,000,000
Sales 25,000,000
A physical inventory taken on December 31, 2012 resulted in an ending inventory of P 5,000,000. On December 31, 2012,
unsold goods on consignment with selling price of P 1,500,000 are in the hands of a consignee. The gross profit on cost
remained constant at 25% in recent years. The entity suspects that some inventory may have been taken by a new
employee. On December 31, 2012, what is the estimated cost of missing inventory?

PROBLEM V
On the night of December 31, 2012, a fire destroyed most of the merchandise inventory of Dexter Company. All goods
were completely destroyed except for partially damaged goods that normally sell for P 100,000 and that had an estimated
net realizable value of P 25,000 and undamaged goods that normally sell for P 60,000. The following data are available:
Inventory, January 1 600,000
Net purchases for 2012 4,300,000
Net sales for 2012 5,600,000
Total 2011 2010 2009
Net Sales 9,000,000 5,000,000 3,000,000 1,000,000
Cost of Sales 6,750,000 3,840,000 2,200,000 710,000
Gross Income 2,250,000 1,160,000 800,000 290,000