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PAS 2 applies to all inventories except
work in progress arising under construction contracts, including directly related service
contracts
financial instruments
biological assets related to agricultural activity and agricultural produce at the point of
harvest
DEFINITIONS
Inventories are assets:
(a) held for sale in the ordinary course of business;
(b) in the process of production for such sale; or
(c) in the form of materials or supplies to be consumed in the production process or in
the rendering of services.
Test of Ownership
a. Legal Test and Exception to the Legal Test
a.1 Title is not synonymous with possession of goods on hand.
a.1.1Goods on hand may not be owned.
a.1.2Goods not on hand may be owned.
a.2 The following matters causes confusion in ownership
a.2.1Goods in transit
a.2.2Consignment sales
a.2.3Goods held by customers on approval or trial basis
MEASUREMENT OF INVENTORIES
Inventories shall be measured at the lower of cost and net realizable value.
Cost of inventories
a. Costs of purchase
a.1 purchase price
a.2 import duties and other taxes (other than those subsequently recoverable by
the entity from the taxing authorities)
a.3 Transport
a.4 Handling
a.5 other costs directly attributable to the acquisition of finished goods, materials
and services
⮚ Trade discounts, rebates and other similar items are deducted in determining the
costs of purchase.
b. Costs of conversion
b.1 direct labor
b. 2 fixed and variable production overheads
⮚ The allocation of fixed production overheads to the costs of conversion is based on
the normal capacity of the production facilities.
⮚ Where there is low level of production and idle plant, the amount of fixed overhead
allocated is not increased. Unallocated overheads are recognized as an expense.
⮚ In periods of abnormally high production, the amount of fixed overhead allocated to
each un it of production is decreased so that inventories are not measured above
cost.
⮚ Absorption (full) Costing vs. Variable (Direct) Costing
c. Other costs (non-production overhead such as costs of designing products for specific
customers
c.1 Cost excluded from the cost of inventories:
c.1.1 abnormal amounts of wasted materials, labor or other production
costs
c.1.2 storage costs, unless those costs are necessary in the production
process before a further production stage
c.1.3 administrative overheads that do not contribute to bringing
inventories to their present location and condition
c.1.4 Selling costs
c.1.5.Finance cost
An entity may purchase inventories on deferred settlement terms.
When the arrangement effectively contains a financing element,
that element, for example a difference between the
purchase price for normal credit terms and the amount paid, is
recognized as interest expense over the period of the financing.
⮚ Once chosen, the cost formula has to be applied consistently, unless the
change is justified under IAS 8.
⮚ Inventories similar in nature should be treated with similar cost formula.
Differences in geographical area do not justify the use of a different cost
formula.
RECOGNITION AS AN EXPENSE
� when inventories are sold
� inventory write-down
Inventory Estimation
⮚ When do we use inventory approximation or estimation?
⮚ When inventories are destroyed by catastrophe, fire, and theft
⮚ To prove reasonableness of physical count Interim reports
Methods:
⮚ Gross Profit Method
Gross profit ratio is assumed to be approximately the same from period to
another.
b. Retail Method
The retail method is often used in the retail industry for measuring inventories of
large numbers of rapidly changing items with similar margins for which it is
impracticable to use other costing methods.
The cost of the inventory is determined by reducing the sales value of the
inventory by the appropriate percentage gross margin.
The percentage used takes into consideration inventory that has been marked
down to below it s original selling price. An average percentage for each retail
department is often used.
Sales 1,260,000
Sales return ( 60,000)
Net Sales 1,200,000
Inventory, end @ retail 400,000
Multiply by Cost Ratio (960,000/1,600,000) 60%
Inventory, end @ cost 240,000
Problem 1
Pau Company had 61,200 units on December 31, 2017, based on physical count of
goods on that date. The following items have not yet been recorded as purchases and
sales as of December 31.
Items 1-4 were shipped by the seller December 31, 2017 and received by the buyer
January 5, 2018.
Required:
How many units should be considered as inventory at the end of December 31, 2017?
Problem 2
Camil Company is preparing its 2017 year-end financial statements. Prior to any
adjustments, inventory is valued at Php3,375,000. The following information has been
found relating to certain inventory transactions.
Required:
Determine the correct inventory amount to be reported on Camil’s statement of financial
position at December 31, 2017.
Reported inventory Php 3,375,000
Adjustments:
a. Goods out on consignment 660,000
b. Goods purchased in transit FOB shipping point 162,000
c. Goods sold in transit FOB shipping point
included in inventory ( 510,000)
d. Goods sold in transit FOB destination
not included in inventory 156,000
g. Goods sold in transit FOB destination
not included in inventory 192,000
Problem 3
Camil Trading’s inventory at the end of 2017 is Php19,000,000, before considering the
following information.
Included in the amount are the following items:
a. Merchandise in transit, purchased FOB shipping point, Php1,360,000
b. Merchandise in transit, purchased FOB destination, with invoice cost of
Php840,000.
c. Goods held on consignment, Php1,000,000
d. Goods out on consignment, at cost plus 50% mark up on cost plus
Php20,000 delivery charge, Php1,220,000.
Excluded in the amount are the following items:
a. Merchandise in transit tom customers, FOB shipping point, at selling price of
Php1,080,000, which includes a 40% mark up on selling price.
b. Merchandise in transit to customers, FOB destination at selling price of
Php800,000, which includes a 40% markup on selling price.
c. Merchandise sold, in transit, “cost, insurance, freight” charged to the buyer,
with selling price of Php360,000 and cost of Php240,000.
Problem 4
The physical inventory on December 31, 2017 of Mari Company showed merchandise at
Php1,032,000. You discovered that the following items were excluded from this amount:
a. Merchandise costing Php189,000 shipped by a vendor FOB shipping point on
December 31, 2017 and received by Mari Company on January 8, 2018.
b. Merchandise costing Php240,000 shipped by a vendor FOB destination on
December 30, 2017 and received by Mari Company on January 7, 2018.
c. Merchandise costing Php75,000 which was shipped FOB destination to a
customer on December 29, 2017. The customer expected to receive the
merchandise on January 3, 2018.
d. Merchandise costing Php171,000 which was shipped FOB shipping point to a
customer on December 29, 2017. The goods are scheduled to arrive at the
destination point on January 8, 2018.
Required:
What is the correct amount of inventory that should appear on Mari’s December 31,
2017 statement of financial position?
Problem 5
The following data were taken from the inventory records of COD department store for
March 2017:
Units Unit Cost Total Cost
Balance at March 1 2,400 Php 10.75 Php 25,800
Purchases: March 15 1,900 11.35 21,565
22 3,800 11.80 44,840
Sales : March 12 2,200
28 3,600
Balance at March 31 2,300
Required: Determine the inventory value at march 31 assuming that (Round off to the
nearest peso)
a. Moving weighted average
b. Weighted average
c. FIFO
a. Cost of ending inventory
3/1 2,400@ 10.75 25,800
3/15 1,900@ 11.35 21,565
4,300@ 11.02 47,365
3/12 2,200@ 11.02 24,244
2,100@ 11.01 23,121
3/28 3,800@ 11.80 44,840
5,900@ 11.52 67,961
3/31 3,600@ 11.52 41,472
2,300@ 11.52 26,489
Problem 6
Toyota Corporation, which was established in 2015, manufactures lubricants used by car
manufacturers. The following data were abstracted from the company’s records:
Required: Determine the amount of the gross profit for each year 2015, 2016, 2017,
using FIFO method and weighted average method.
(a) FIFO 2015 2016 2017
Sales P24,000,000 P37,600,000 P58,800,000
Cost of goods sold 14,000,000 25,520,000 40,500,000
Gross profit P10,000,000 P12,080,000 P18,300,000
Cost of goods sold:
2015 20,000 x700 = 14,000,000
2016 6,000 x 700 = 4,200,000
26,000 x 820 = 21,320,000 25,520,000
2017 10,000 x 820 = 8,200,000
38,000 x 850 = 32,300,000 40,500,000
Problem 7
Required:
Under the lower of cost or net realizable value, what amount should Joyce Company
report as chocolate inventory on its December 31, 2017 statement of financial position.
Problem 8
Required:
Using the lower of cost and net realizable value, determine the total inventory value to
be presented in Uniwide Sales Trading’s statement of financial position.
Prior to 2017, the application of 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 assuming the company applies the lower of cost and net
realizable value using the allowance method.
Problem 10
You audit of Mari Company’s inventory and related records revealed the following
information:
Inventory, January 1, 2017 Php 900,000
Purchases for the year 2017 7,300,000
Sales for the year 2017 8,400,000
Required:
Determine the estimated cost of the missing inventory, assuming Mari Company’s gross
profit remained constant at
a. 40% on sales
b. 405 on cost of sales
On May 6, 2017, a flash flood caused damage to the merchandise stored in the
warehouse of Pau Company. You were asked to submit an estimate of the merchandise
destroyed in the warehouse. The following data were established.
From January 1, 2017 to date of flood, you ascertained invoice value of purchase (all
stored in the warehouse), Php2,000,000; freight inward, Php80,000; purchase returns,
Php120,000.
Cost of merchandise transferred from the warehouse to showroom was Php160,000 and
net sales January 1 to May 6, 2017 (all warehouse stock), Php6,400,000.
Required:
Assuming gross profit rate in 2017 to be the same as in the previous year, what was the
estimated cost of merchandise destroyed by the flood?
*11,200,000/16,000,000 = 70%
** 4,000,000 x 10% = 400,000
Problem 12
Camil Company is engaged in buying and selling of cleansing products. The following
transactions and other information are available for the year ended December 31, 2017:
At December 31, 2017, purchases costing Php100,000 were in transit, FOB shipping
point.
Required:
Determine the estimated cost of inventory at December 31, 2017, assuming that the
company maintains sells its products allowing a 40% gross profit on sales.
Inventory, January 1 P 200,000
Purchases P5,000,000
Purchase returns (80,000)
Purchase discounts (5,000,000 x 80%) x 2% (80,000) 4,840,000
Total P 5,040,000
Estimated cost of goods sold
(7,380,000 – 180,000) x 60% 4,320,000
------------------
Estimated cost of ending inventory P 720,000
Goods in transit ( 100,000)
Estimated cost of ending inventory P 620,000
Problem 13
Angel Company began operations in 2014. On August 28, 2017, a fire broke out in the
company’s warehouse destroying all inventory and most of the accounting records. The
following information was assembled from the microfilmed records. All sales and
purchases are on account.
The company’s average gross profit percentage for the past three years is 30%.
Required:
Estimate the ending inventory and cost of goods sold for June under (a) FIFO cost basis
and (b) Average cost basis.
Problem 15
Lacoste Company uses the FIFO retail method of inventory valuation. The following
information is available:
Cost Retail
Inventory, beginning Php 145,000 Php 160,000
Purchases (net) 283,920 420,800
Additional markups 25,200
Mark up cancellations 9,200
Markdowns 38,100
Markdowns cancellation 6,900
Sales 450,000
Sales returns 15,200
Sales discounts 3,800
Required:
What would be the estimated cost of ending inventory, using average cost retail?
1. The factor which determines whether or not goods should be included in a physical
count of inventory is ___________.
a. physical possession.
b. legal title.
c. management's judgment.
d. whether or not the purchase has been paid for.
5. Goods in transit should be included in the inventory of the buyer when the
a. public carrier accepts the goods from the seller.
b. terms of sale are FOB delivery point.
c. terms of sale are FOB destination.
d. none of the above.
6. A firm just starting in business purchased three inventory items at the following prices.
First purchase Php80; second purchase Php95; third purchase Php85. If the firm sold
two units for a total of Php240 and used FIFO costing, the gross profit for the period
would be __________.
a. Php65. c. Php60
b. Php75. d. Php50
An entity just starting business made the following four inventory purchases in June:
June 1 150 units Php1,500
June 10 20 units 1,170
June 15 20 units 1,260
June 1320 units 990
Php 4,920
7. A physical count of inventory on June 30 reveals that there are 200 units on hand.
Using the FIFO inventory method the amount allocated to cost of sales for June is
a. Php3,500. c. Php4,770
b. Php4,659. d. Php4,200
8. Using the weighted average cost method the amount allocated to the ending inventory
on June 30 is ___________.
a. Php185. c. Php261
b. Php226. d. Php196.
10. A problem with the specific identification method of inventory valuation is that
a. inventories can be reported at actual costs.
b. some types of inventory cannot use the method.
c. matching is not achieved.
d. the lower of cost or net realisable value rule cannot be applied.
11. The accounting principle that requires the cost flow assumption be consistent with
the physical movement of goods in the warehouse is
a. called the matching principle.
b. called the consistency principle.
c. nonexistent; that is, there is no such accounting requirement.
d. called the physical flow assumption.
13. If companies have identical inventoriable costs but use different inventory flow
assumptions, when the price at which goods are purchased has not been constant, then
the
a. cost of sales for the companies will be identical.
b. cost of goods available for sale of the companies will be identical.
c. ending inventory of the companies will be identical.
d. profit of the companies will be identical.
15. The managers of Teng Enterprises receive performance bonuses based on the profit
of the firm. Which inventory costing method are they likely to favour in periods of rising
prices?
a. FIFO
b. Weighted-average Cost
c. LIFO
d. Physical inventory method
18. The E, S and J partnership made an inventory count on December 31, 2009. During
the count, one of the clerks made the error of counting an inventory item twice. For the
statement of financial position at December 31, 2009, the effects of this error are
Assets Liabilities Owner’s Equity
a. overstated understated overstated
b. understated no effect understated
c. overstated no effect overstated
d. overstated overstated understated
19. The following information is available for Tye Manufacturing at December 31 2009.
Beginning inventory Php80,000; ending inventory Php120,000; cost of sales
Php1,200,000; and sales Php1,600,000. Tye’s inventory turnover ratio in 2009 is
a. 12 times. c. 16times
b. 15 times. d. 10 times
20. The Jansen Company uses the perpetual inventory system and the moving average
method to value inventories. On August 1, there were 10,000 units valued at Php30,000
in the beginning inventory. On August 10, 20,000 units were purchased for Php6 per
unit. On August 15, 24,000 units were sold for Php12 per unit. The amount charged to
cost of sales on August 15 was
a. Php80,000. c. Php144,000
b. Php120,000. d. Php108,000
21. Under the gross profit method, each of the following items are estimated except for
a. cost of ending inventory.
b. cost of sales.
c. cost of goods purchased.
d. gross profit.
22. The Watson Department Store utilises the retail inventory method to estimate its
inventories. It calculated its cost to retail ratio during the period at 75%. Goods available
for sale at retail amounted to Php200,000 and goods were sold during the period for
Php125,000. The estimated cost of the ending inventory is
a. Php75,000. c. Php56,250
b. Php150,000. d. Php100,000
23. Wiley’s records indicate the following information for the year:
Inventory 1/1 Php 440,000
Purchases 1,800,000
Net Sales 2,400,000
On December 31 a physical inventory determined that ending inventory of php480,000
was in the warehouse. Wiley’s gross profit on sales has remained constant at 30%.
Wiley suspects some of the inventory may have been taken by a new employee. At
December 31 what is the estimated cost of missing inventory?
a. Php80,000.
b. Php160,000.
c. Php240,000.
d. Php560,000.
28. Under these shipping terms, the buyer pays for the freight, which legally must be
borne by the seller.
a. FOB shipping point, freight prepaid.
b. FOB shipping point, freight collect.
c. FOB destination, freight prepaid.
d. FOB destination, freight collect.
29. When using the periodic inventory method, which of the following generally would
not be separately accounted for in the computation of cost of goods sold ?
a. Trade discounts applicable to purchases during the period.
b. Cash (purchase) discounts taken during the period.
c. Purchase returns and allowances of merchandise during the period.
d. Cost of transportation-in for merchandise purchases during the period.
31. Which of the following is not true of the perpetual inventory method?
a. Purchases are recorded as debits to inventory account.
b. The entry to record a sale includes a debit to cost of goods sold and a credit to
inventory.
c. After a physical inventory count, inventory is credited for any missing inventory.
d. Purchase returns are recorded by debiting accounts payable and crediting
purchase returns and allowances.
32. Which costing method is appropriate for inventories that are segregated for a
specific project and inventories that are not ordinarily interchangeable?
a. specific identification c. weighted average
b. standard cost d. moving average.
33. Which of the following inventory costing methods reports most closely the current
cost of inventory on the statement of financial position?
a. FIFO c. Specific identification
b. LIFO d. Weighted average method
34. During periods of rising prices, when the FIFO inventory cost flow method is used, a
perpetual inventory system would
a. not be permitted.
b. result in a higher ending inventory than a periodic inventory system.
c. result in the same ending inventory as a periodic inventory system.
d. result in a lower ending inventory than a periodic inventory system.
35. In a period of rising prices, the inventory cost formula that tends to result in the
highest reported profit is
a. FIFO c. moving average
b. specific identification d. LIFO
36. When using the moving average method of inventory valuation, a new cost must be
computed after each
a. purchase c. purchase and issuance from inventory
b. issuance from inventory d. month-end.
37. In periodic inventory system that the weighted average cost flow method, the
beginning inventory is
a. net purchases minus the ending inventory.
b. net purchases minus the cost of goods sold.
c. total goods available for sale minus the net purchases.
d. total goods available for sale minus the cost of goods sold.
38. The gross profit method of estimating inventory would not be useful when
a. a periodic system is in use and inventories are required for interim
statements.
b. inventories have been destroyed or lost by fire, theft, or other casualty, and the
specific data required for inventory valuation are not available.
c. there is a significant change in the mix of the products being sold.
d. there is significant unmonitored change in the relationship between gross profit
and the selling price of goods being sold.
39.The retail inventory method would include which of the following in the calculation of
the goods available for sale at both cost and retail?
a. purchase returns c. markdowns
b. sales returns d. markups
41. The average retail method is based on the assumption that the
a. ratio of gross margin to sales is approximately the same each period.
b. ratio of cost to retail changes at a constant rate.
c. beginning inventory and the cost of goods sold contain in the same
proportion of high-cost and low-cost ratio goods.
d. gross margin percentage applicable to ending inventory and to the goods sold
during the period is the same.
42. Which statement is accurate about calculating the cost ratio to be used with the
average retail inventory method under IAS 2 inventories?
a. The beginning inventory is excluded and markdowns are not deducted.
b. The beginning inventory is included and markdowns are not deducted.
c. The beginning inventory is included and markdowns are deducted.
d. The beginning inventory is excluded and markdowns are deducted.
44. Toby’s Sportwear, Inc. regularly buys sweaters from Waley Company and is allowed
a trade discount of 20% and 10% from the list price. Toby made a purchase on March
20, 2016 and received an invoice with a list price of Php90,000, a freight charge of
Php5,000, and payment terms of net 30 days. What is the total cost of the inventory
purchase?
a. Php63,000 c. Php69,000
b. Php64,000 d. Php69,800.
48. Elen Corporation uses the perpetual inventory method. On March 1, it purchased
Php10,000 of inventory, terms 2/10, n/30. On March 3, Elkins returned goods that cost
Php1,000. On March 9, Elkins paid the supplier. On March 9, Elkins should credit
a. purchase discounts for Php200.
b. inventory for Php200.
c. purchase discounts for Php180.
d. inventory for Php180.
49. Mae Corporation uses the perpetual inventory method. On March 1, it purchased
Php30,000 of inventory, terms 2/10, n/30. On March 3, Malone returned goods that cost
Php3,000. On March 9, Malone paid the supplier. On March 9, Malone should credit
a. purchase discounts for Php600.
b. inventory for Php600.
c. purchase discounts for Php540.
d. inventory for Php540.
50. Bear Inc. took a physical inventory at the end of the year and determined that
Php650,000 of goods were on hand. In addition, Bell, Inc. determined that Php50,000 of
goods that were in transit that were shipped f.o.b. shipping were actually received two
days after the inventory count and that the company had Php75,000 of goods out on
consignment. What amount should Bell report as inventory at the end of the year?
a. Php650,000 c. Php725,000
b. Php700,000 d. Php775,000
51. Bear Inc. took a physical inventory at the end of the year and determined that
Php475,000 of goods were on hand. In addition, the following items were not included in
the physical count. Bell, Inc. determined that Php60,000 of goods were in transit that
were shipped f.o.b. destination (goods were actually received by the company three
days after the inventory count).The company sold Php25,000 worth of inventory f.o.b.
destination. What amount should Bell report as inventory at the end of the year?
a. Php475,000 c. Php500,000
b. Php535,000 d. Php560,000
52. Rose Inc. reported total assets of Php1,200,000 and net income of Php135,000 for
the current year. Risers determined that inventory was overstated by Php10,000 at the
beginning of the year (this was not corrected). What is the corrected amount for total
assets and net income for the year?
a. Php1,200,000 and Php135,000.
b. Php1,200,000 and Php145,000.
c. Php1,190,000 and Php125,000.
d. Php1,210,000 and Php145,000.
53. Rose Inc. reported total assets of Php1,600,000 and net income of Php85,000 for
the current year. Risers determined that inventory was understated by Php23,000 at the
beginning of the year and Php10,000 at the end of the year. What is the corrected
amount for total assets and net income for the year?
a. Php1,610,000 and Php95,000.
b. Php1,590,000 and Php98,000.
c. Php1,610,000 and Php72,000.
d. Php1,600,000 and Php85,000.
Hudson, Inc. is a calendar-year corporation. Its financial statements for the years 2016
and 2015 contained errors as follows:
2016 2015
Ending inventory Php 3,0000 over Php 8,000 over
Depreciation expense 2,000 under 6,000 over
54. Assume that the proper correcting entries were made at December 31, 2015. By how
much will 2016 income before taxes be overstated or understated?
a. Php1,000 understated c. Php2,000 overstated
b. Php1,000 overstated d. Php5,000 overstated.
55. Assume that no correcting entries were made at December 31, 2015. Ignoring
income taxes, by how much will retained earnings at December 31, 2016 be overstated
or understated?
a. Php1,000 understated c. Php5,000 understated
b. Php5,000 overstated d. Php9,000 understated
56. Assume that no correcting entries were made at December 31, 2015, or December
31, 2016 and that no additional errors occurred in 2017. Ignoring income taxes, by how
much will working capital at December 31, 2017 be overstated or understated?
a. Php0 c. Php2,000 understated
b. Php2,000 overstated d. Php5,000 understated
57. The following information is available for Nero Company for 2016:
Freight-in Php 30,000
Purchase returns 75,000
Selling expenses 150,000
Ending inventory 260,000
The cost of goods sold is equal to 400% of selling expenses. What is the cost of
goods available for sale?
a. Php600,000. c. Php815,000
b. Php890,000. d. Php860,000.
59. By how much should the account payable be adjusted on May 31?
a. Php0 c. Php320
b. Php344 d. Php296.
The following information was available from the inventory records of Pretty Pau
Company for January:
Units Unit Cost Total Cost
Balance at January 1 3,000 Php 9.77 Php 29,310
Purchases:
January 6 2,000 10.30 20,600
January 26 2,700 10.71 28,917
Sales:
January 7 (2,500)
January 31 (4,000)
Balance at January 31 1,200
60. Assuming that Pretty Pau does not maintain perpetual inventory records, what
should be the inventory at January 31, using the weighted-average inventory method,
rounded to the nearest peso?
a. Php12,606 c. Php12,312
b. Php12,284. d. Php12,432
61. Assuming that Pretty Pau maintains perpetual inventory records, what should be the
inventory at January 31, using the moving-average inventory method, rounded to the
nearest peso?
a. Php12,606 c. Php12,312
b. Php12,284 d. Php12,432
.
Beautiful Mil Co. has the following data related to an item of inventory:
Inventory, March 1 100 units @ Php4.20
Purchase, March 7 350 units @ Php4.40
Purchase, March 16 70 units @ Php4.50
Inventory, March 31 130 units
62. The value assigned to cost of goods sold if Beautiful Mil uses FIFO is
a. Php579 c. Php1,723
b. Php552 d. Php1,696.
63. Pretty Mari Company has been using the average cost method of inventory valuation
for 10 years, since it began operations. Its 2015 ending inventory was Php40,000, but it
would have been Php60,000 if FIFO had been used. Thus, if FIFO had been used,
Pretty Mari's income before income taxes would have been
a. Php20,000 greater over the 10-year period.
b. Php20,000 less over the 10-year period.
c. Php20,000 greater in 2015.
d. Php20,000 less in 201.
64. June Corp. sells one product and uses a perpetual inventory system. The beginning
inventory consisted of 10 units that cost Php20 per unit. During the current month, the
company purchased 60 units at Php20 each. Sales during the month totaled 45 units for
Php43 each. What is the number of units in the ending inventory?
a. 10 units c. 25 units
b. 15 units. d. 70 units
65. June Corp. sells one product and uses a perpetual inventory system. The beginning
inventory consisted of 10 units that cost Php20 per unit. During the current month, the
company purchased 60 units at Php20 each. Sales during the month totaled 45 units for
Php43 each. What is the cost of goods sold using the FIFO method?
a. Php200 c. Php1,200
b. Php900 d. Php1,935
66. Checkers uses the periodic inventory system. For the current month, the beginning
inventory consisted of 1,200 units that cost Php12 each. During the month, the company
made two purchases: 500 units at Php13 each and 2,000 units at Php13.50 each.
Checkers also sold 2,150 units during the month. Using the average cost method, what
is the amount of cost of goods sold for the month?
a. Php27,843 c. Php26,975
b. Php28,950 d. Php27,950
67. Chessy uses the periodic inventory system. For the current month, the beginning
inventory consisted of 200 units that cost Php65 each. During the month, the company
made two purchases: 300 units at Php68 each and 150 units at Php70 each. Chessy
also sold 500 units during the month. Using the average cost method, what is the
amount of ending inventory?
a. Php10,500 c. Php33,400
b. Php33,770 d. Php10,131.
68. Checkers uses the periodic inventory system. For the current month, the beginning
inventory consisted of 1,200 units that cost Php12 each. During the month, the
Phpcompany made two purchases: 500 units at Php13 each and 2,000 units at
Php13.50 each. Checkers also sold 2,150 units during the month. Using the FIFO
method, what is the ending inventory?
a. Php20,073 c. Php20,925
b. Php18,600 d. Php18,950
69. Chessy uses the periodic inventory system. For the current month, the beginning
inventory consisted of 200 units that cost Php65 each. During the month, the company
made two purchases: 300 units at Php68 each and 150 units at Php70 each. Chessy
also sold 500 units during the month. Using the FIFO method, what is the amount of cost
of goods sold for the month?
a. Php33,770 c. Php34,150
b. Php32,500 d. Php33,400.
70. Dole Corp.'s accounts payable at December 31, 2016, totaled Php800,000 before
any necessary year-end adjustments relating to the following transactions:
On December 27, 2016, Dole wrote and recorded checks to creditors totaling
Php350,000 causing an overdraft of Php100,000 in Dole's bank account at December
31, 2016. The checks were mailed out on January 10, 2017.
On December 28, 2016, Dole purchased and received goods for Php150,000, terms
2/10, n/30. Dole records purchases and accounts payable at net amounts. The invoice
was recorded and paid January 3, 2017.
Goods shipped f.o.b. destination on December 20, 2016 from a vendor to Dole were
received January 2, 2017. The invoice cost was Php65,000.
At December 31, 2016, what amount should Dole report as total accounts payable?
a. Php1,362,000 c. Php1,050,000
b. Php1,297,000 d. Php950,000
71.The balance in Pretty Mom Co.'s accounts payable account at December 31, 2016
was Php700,000 before any necessary year-end adjustments relating to the following:
Goods were in transit to Pretty Mom from a vendor on December 31, 2016. The invoice
cost was Php40,000. The goods were shipped f.o.b. shipping point on December 29,
2016 and were received on January 4, 2017.
Goods shipped f.o.b. destination on December 21, 2016 from a vendor to Pretty Mom
were received on January 6, 2017. The invoice cost was Php25,000.
On December 27, 2016, Pretty Mom wrote and recorded checks to creditors totaling
Php30,000 that were mailed on January 10, 2017.
In Pretty Mom's December 31, 2016 statement of financial position, the accounts
payable should be
a. Php730,000 c. Php765,000
b. Php740,000 d. Php770,000.
72. Keri Co.'s accounts payable balance at December 31, 2016 was Php1,500,000
before considering the following transactions:
Goods were in transit from a vendor to Keri on December 31, 2016. The invoice price
was Php70,000, and the goods were shipped f.o.b. shipping point on December 29,
2016. The goods were received on January 4, 2017.
Goods shipped to Keri, f.o.b. shipping point on December 20, 2016, from a vendor were
lost in transit. The invoice price was Php50,000. On January 5, 2017, Keri filed a
Php50,000 claim against the common carrier.
In its December 31, 2016 statement of financial position, Kerr should report accounts
payable of
a. Php1,620,000 c. Php1,550,000
b. Php1,570,000 d. Php1,500,000
73. Waley Retailers purchased merchandise with a list price of Php50,000, subject to
trade discounts of 20% and 10%, with no cash discounts allowable. Walsh should record
the cost of this merchandise as
a. Php35,000 c. Php39,000
b. Php36,000 d. Php50,000
74. Keck Co. had 450 units of product A on hand at January 1, 2016, costing Php42
each. Purchases of product A during January were as follows:
Date Units Unit Cost
Jan. 10 600 Php 44
18 750 46
28 300 48
A physical count on January 31, 2016 shows 600 units of product A on hand. The cost of
the inventory at January 31, 2016 under the FIFO method is
a. Php25,500 c. Php28,200
b. Php26,700 d. Php24,600