Answer Key to Module 2 - Inventories

Item Answer
1 515,800
2 206,600 increase
3 18,489
4 331,500
5 785,000
6 503,500
7 771,500
8 65,065
9 76,335
10 26,497
11 75,692
12 66,130
205,882
13 58,824
235,294
14 1,366,000
15 69,000

16 400,000

17 600,000
18 718,000

19 200,000

20 300,000

21 542,000
22 283,077
23 225,037
24 224,434
25 221,846
26 220,322
Inventories

Review Notes
Only items 2, 3, 4 are to be adjusted.
Only items 1, 3, 5 are considered adjustments.

Allocated value for the treadmill

Allocated value for the dumbbell set
Allocated value for the stationary bicycle

Since there is a beginning balance of P200,000 in the allowance account

and based on the LCNRV assessment, the required balance of the
allowance account at year-end is P600,000, only P400,000 will be
recognized as a loss in the income statement.
The required balance of the allowance account at year-end's SFP.

Take note that according to the agreement, the CERES will pay P5,500 per
barrel. However, since the market price has declined, it should have been
more advantageous to buy at the market. However, as a result of the firm
purchase commitment, CERES cannot cancel or back-out from the
contract; otherwise, non-performance will entail a significant penalty.

Cost ratio "based on sales" is 70%.

Cost ratio "based on cost" is approximately 77%. [100%/130%]

CORRECTION: Kindly round off the cost ratio to FOUR decimal places.

Please refer to the file entitled "Guide to Retail Inventory Method" for
reference.
CORRECTION: Kindly round off the cost ratio to FOUR decimal places.

Please refer to the file entitled "Guide to Retail Inventory Method" for
reference.