CHAPTER 4 4-1.(Hamster Company) Include Exclude Goods displayed in the store 7 ‘Goods stocked in the warehouse, not covered by any v sales contract ‘Goods purchased, in transit, shipped FOB seller v ‘Goods purchased, in transit, shipped FOB v destination Freight cost on goods received, goods are stl v unsold Goods held an consignment v ‘Goods out on consignment ‘Goods out to customers on approval ‘Goods in the hands of traveling salesmen ‘Goods sold with a buyback arrangement for the fall selling price and other casts incurred by the buyer Unused factory supplies and indirect materials Goods whieh require additional processing Direct materials stocked in the warehouse ‘Storage costs of goods completed Insurance premiums paid on stocked goods ‘Goods completed, manufactured to customers v specification, awaiting instruction for delivery by the customer Freight paid on goods sold Unused supplies for administrative purposes Unused store supplies ‘Goods sold with a right to return granted to buyers, amount of return is reasonably predictable. 4-2. (Crossings Company) Invoice price (150,000 x 0.80 x 0.90) P 108,000 Freight charge —2.500 ‘Total cost of merchandise purchases P_110.500 4-3. (Jane, Ine.)Chapter 4 Inventories 45. 47. Reported units on April 30, 2013 10,200 Adjustments: No. 1 item ~ Purchased FOB shipping point still in transit not included in purchases 250 No, 3 item ~ Sold FOF destination still in transit not included in inventory 500 Correct inventory quantity 10.250 (Orient Trading) Reported inventory 9,500,000 ‘Merchandise in transit purchased FOB destination (420,000 Goods held on consignment (500,000) Mark up on goods out on consignment Sales price 600,000 Cost (600,000 1.5) 400,000 (200,000) Merchandise in transit to customers FOB destination 400,000 x (100% - 4056) 240,000 Correct inventory ‘P8,620,000 (Tintin Company} Physical inventory at December 31, 2013 P 172,000 Merchandise in transit shipped FOB shipping point 81,500 Merchandise sold FOB destination still in transit 12.500 Correct inventory at December 31, 2013 2.216.000 (Centerpoint, Inc.) Reported inventory P 562,500 Adjustments: ‘& Goods out on consignment 110,000 b. Goods purchased in transit FOB shipping point 27,000 ©. Goods sold in transit FOB shipping point included in inventory (85,000) 4. Goods sold in transit FOB destination not included in inventory 26,000 & Goods sold in transit FOB destination not inchuded in inventory 7.000 Correct inventory 577.500 (Mega Company) ‘Cost of Ending Inventor Cost of Goods Sold Gross Profit FIFO 8.506 4.550 1.985 Weighted average 3.333 4.726 4779 ‘Moving average 3.370 4,686 1819 FIFO Cost of ending inventory: 275 x 11.75 25 x 11.00 3,506.25 Cost of goods sold Cost of goods available for sale 8,056.25 Less ending inventory 3506.25 4.550.00 74h 8 Gross profit: Sales 6,505.00 Less cost of goods sold 4,550.00 Weighted average Cost of ending inventory: Cost of goods available for sale 8,056.25, ‘Number of units available for sale +25 ‘Weighted average cost per unit TAL Units in ending inventory x_300 Cost of goods sold: Cost of goods available for sale 8,056.25 Less ending inventory 3,330.00 Gross profit: Sales 505.00 Less cost of goods sold 4,726.25 Moving average Cost of ending inventory: Inventory, January 1 250 x 10.50 = 2,625.00 Purchase, March 7 200 x 11,00 = 2,200.00 ‘Total ‘450 x 10.72 = 4,825.00 Sale, May 20 (120 x 10.72 = 1,286.40) Sale, June 30 55 x10.72= 559,60) Balance 275 x 10.72 = 2,949.00 Purchase, July 15 275x 11.75 =3.231.25 Total 550 x 11.24 = 6,180.25 Sale, September 17 (250.x 11.24 = 2,810.00) Balance 300 x 11.24= Cost of goods sold: Cost of goods available for sale 8,056.25 Less ending inventory 3370.25 Gross profit: Sales 6,508.00 Less cost of goods sold 4.086,00 andes noarsies) Cost of ending inventory 1/1 2,4000 10.75 25.800 1/5 1,900@ 11.35 21,585 4,800 11.02 47,365 1/8 2,200@ 11,02__24,244 2,100@ 11,01 23,121 1/24 3.8000 11,80 44.840 5,9000 11,52 67,961 1/30 3.6000 11.52 41,472 2.3008 11,52 26.489. b. Cost of goods available for sale (25.800 + 21.565 + 44.840) 1,955.00 3,383.00 4,726.15 1,778.75, 3,370.25 4,686.00 1,819.00 92,205,Chapter 4= Inventories 49. 410. an. 412, 413, ‘Number of units available for sale (2,400 + 1,900 + 3,800) + 8.100 Weighted average cost per unit ‘Number of units in ending inventory Cost of ending inventory (Rockwell Club, Inc.) Cost of sales: Sales (160,500 x 12) 1,926,000 Less gross profit 738,600 ‘Add ending inventory 442,000 x 7.40 310,800 3,000 x 7.20 21,600 Available for sale Deduct purchases Inventory, January 1 Average cost per unit (369,750 + 51,000 units) (Sta. Lucia Company) 20lL Reported profit under average method 3,600,000 Difference in inventory using FIFO Beginning inventory - Ending inventory 40,000 Profit under FIFO basis 3,640,000 (City Company) Cost (under FIFO basis) Net realizable value (40,000 ~ 12,000) Lower of cost and net realizable value (Rustan’s Trading) ‘Product Cost NRY Lower A 102 105, 102 B 45 42 42 c 2 22 22 D 9 10 9 Tolal Dechavez Company (a) Direct Method ‘The profit is computed as follows Sales: Cost of goods sald Gross profit Selling expenses 29 P 11,38 x_2,300 26.174 Amount Units 1,187,400 160,500 P7225 2012 2013 5,000,000 P7,000,000 (40.000) (120.000) 120,000 ‘850,000 5,080,000 7.530.000 26,000 28,000 4,000 408,000 6,000 252,000 5,500 121,000 7,200 64,800 845.800 2013 2012 3,200,000 _P2,900,000 1,280,000) (1,020,000) 1,920,000 1,880,000 (450,000) (330,000)Chapter 4 Inventories a1, 415, 416, General and administrative expenses Profit Cost of goods sold: ‘Beginning inventory Purchases ‘Total cost of goods available for sale Ending inventory Cost of goods sold (b) Allowance method ‘The profit is computed as follows Sales Cost of goods sold Gross profit Selling expenses General and administrative expenses Decline in NRV Gain on adjustment of allowance Profit Cost of goods sold: Beginning inventory Purchases ‘Total cost of goods available for sale Ending inventory Cost of goods sold (Purple Company) Cost Net realizable value (204,000 ~ 10,000) Loss (Powder Blue Company) Inventory, January 1 Purchases during the year Cost of goods available for sale Less Inventory, December 31 Cost of goods sold (Philam Grocers Company) (a) Cost of product X and product ¥ January 1 inventory Purchases, Sold December $1 inventory Unit cost (all coming from latest purchase price, as ending inventory is less than number in latest purchases) 30 (300.000) £310,000) B1.170,000 — P_1.240,000 P 480,000 300,000 1,400,000 _1,200,000 1,880,000 P 1,500,000, ‘500,000 __480,000 1.280.000 81,020,000 2013 2012 3,200,000 2,900,000 (4.240.000) 1.080.000), 1,960,000 1.820.000 (450.000) (830,000 (600.000) (310,000) (40,000 nee 60.000 B1.170,000 — P_1.240,000 P 500,000 P_ 360,000 —1.400,000 — _1,200,000 1,900,000 P 1,580,000 (560,000) '500,000 B1.240,000 B-1,080,000 200,000 194,000 8.000 1,400,000 6,600,000 8,000,000 1.200.000 5,800,000 Product X Product ¥ 2,500 units 1,500 units 7.400 units 4,500 units (7.000 units) (5,000 units)_ 2,900 units 1,000 units pis PosChapter 4 o I Ending inventory at FIFO cast Sales price (effective 2014) 90% x previous SP Estimated selling cost Net realizable value Lower of cost and net realizable value, per unit Number of units in ending inventory Inventory value at lower of cost and NRV P362.500 98,000 ProductX Product ¥ 135.00 111.60 23.50) ane) P121.50 100.44 P121.50 POS, 2,900 units 1,000 units 352,350 98,000 ‘Total inventory value at December 31, 2013 352,350+98,000 = P450,350 (©) Cost of goods sold in the statement of comprehensive income ProductX Product ¥ @ cc} Inventory Jan. 1 300,000 Purchases 916,600 Goods available for sale P1.216,600 567.500 _P1.784,100 Ending inventory at cost 362,500 98,000 460.500 Cost of goods sold 1,323,600 Inventory at cost 460,500 Inventory at lower of cost and NRV 450,350 Required allowance P 10.150 Existing allowance 15,000 Gain on adjustment of allowance B_4.850 Inventory 480,500 Income Summary 460,500 (or using the cast of goods sold method) Inventory, December 31 Cost of goods sold Purchases: Inventory, January 1 Allowance to Reduce Inventory to NRV Gain on Adjustment of Allowance to Reduce Inventory to NRV 4-17. (DEC Company) ) 0) Gross profit is 40% based on sales Merchandise inventory, January 1, 2013 Purchases for the year Cost of goods available for sale Less estimated cost of goods sold (4,200,000 x 60%) Estimated cost of ending inventory Physical inventory on December 31, 2013 Estimated cost of the missing inventory Gross profit is 40% based on cost of sales Merchandise inventory, January 1, 2013 Purchases for the year 31 4,850 P 450,000 3,150,000 3,600,000 -2.520,000 P 1,080,000 '500,000 P__580.000 P 450,000 3,150,000418. 419. 4-20. 421, Cost of goods available for sale Less estimated cost of goods sold (4.200.000/1.40) Estimated cast of ending inventory Physical inventory on December 31, 2013, Estimated cast of the missing inventory Estimated cost of goods sold (705,000 ~ 18,000)/ 1.20 Add Inventory at July 20, 2013 Cost of goods available for sale Less net purchases for the period (650,000 - 12,000 + 6,000) Estimated! cost of June 30, 2013 inventory (Manel’s Company) ‘Merchandise inventory, January 1 Purchases (1,000,000 + 40,000 ~ 60,000) Available for sale Estimated cost of goods sold (8,200,000 x 70%) Estimated ending inventory Less goods undamaged located in showroom (200,000 + 80,000) Estimated cost of merchandise destroyed by the flood {01d Rose Company) Inventory, January 1, 2013 Purchases Freight in Cost of goods available for sale Estimated cost of goods sold (2,200,000 ~ 50,000) x 70% Estimated cost of ending inventory Inventory per actual count Shortage in inventory (Blazing Red Company) Inventory, January 1, 2012 Purchases! Payments to suppliers 1,950,000 Accounts Payable, 8/28/12 491,400 Accounts Payable, 1/1/12 (252,560) Cost of goods available for sale Estimated cost of goods sold: Collections from customers 3,015,200 ‘Accounts Receivable, 8/28/12 515,560 Accounts Receivable, 1/1/12 (522,360) Sales 3,008,400 Cost percentage 70% Estimated cost of ending inventory Estimated cost of ending inventory Less undamaged goods: Goods out on consignment P 195,000 Goods in transit, 169.500 Estimated inventory fire loss 3,600,000 P 600,000 B__100,000 572,500 777,500 2,000,000 2,980,000 2,240,000 P 740,000 1,000,000 ‘800,000 1,820,000 P 315,000 P 575,400 2.664.240 2,105,860 P 558,360 P 558,360 264.500Chapter 4 Inventories o Dec. 31, 2013 Loss on Purchase Commitments 50,000 Estimated Liability on Purchase Commitments 50,000 1,000 x (1,200 ~ 1,150) Feb. 28, 2014 Purchases 1,200,000 Estimated Liability on Purchase Commitments 50,000 Accounts Payable 1,200,000 Recovery of Loss on Purchase Commitments 530,000 MULTIPLE CHOICE QUESTIONS Mc |D Mc [A uci [¢ MCI6 [A Mca [A ™wc7_[ A MCI2 | A Mci7 | D cs |D cs_|D MCIS | A ‘cis | D Mca | D co [A Mci4 | c Mc19 | C Mcs | D Mc10 [A Mc15 | D ‘Mc20 | D ™Mc21 | D Problems Mc22__[D | 90.000 x80 x ..90 = 64,800; 64.800 + 5,000 = 69.800 MC23_|C | 150,000 x .85 x 90 x .95 = 109,012.50 Meza [A | 109,012.50 x.98 = 106,832.25 Mc25_|B | 3,280,000 + 900,000- 80.000 = 4,100,000 x 3% =123,000: 123,000-27,000-96.000 Mc26_|D__| 1,500,000 + 50.000 = 1.550.000 MC27_|B | (b) 450,000 + 1.5 = 300,000; (a) 600,000 + 60,000 = 660,000 (€) 300,000 + 1.5 = 200,000 + 30,000 = 230,000 3,000,000 + 300.000 + 660.000 + 230.000) = 4.190.000 Mc28 | C | 5.000.000 + 80.000 + 800.000 ~ 25.000 = 5.855.000 mcza__|B | 77,500 + 6,000 = 83,500 Mc30_| C__| 550.000 + 90.000 + 380.000 + 450,000 + (150.000 x .80) = 1.590.000 Mcsi_[C | 104,000 + 1.3 = 80.000; 80,000 x.30 = 24.000 24,000 + 56,000 + (92,500 ~ 25,000) = 87.500 Mc32_ [A | (3,000 x 35) + (2,000 x 36) + (1,000 x 37) = 214,000 Sales, (4,000 x 25) + (2.000 x 26) = 152.000 CGS:_214.000 ~ 152.000 = 62.000 MC33_[C | (1.600 x 8) + (4.800 x 9.60) = 58.880: 58.880 + 6.400 = 9.20 Mc34_|B | Confidence: cost 22; NRV=30-3= 27; lower is 22 Positive attitude: cost 55: NRV = 80~28 = 52: lower is 52, Mc35_|C | (2.000 x 25}+(2.000 x 36}+(3.000 x 120) +{4.000 x 18) 529.000 Mc3a6_|C__| 600.000 + 1.500.000 - (2.240.000 + 1.4) = 500,000 Mc37_[C | 2,550,000 + 250,000 - 300,000 = 2.500.000 Purchases 2,800,000 + 300,000 ~ 700,000 = 3,000,000 Sales 8,000,000 = 1.25 = 2,400,000 CGS 180,000 + 2,500,000 ~ 2,400,000 = 280,000; 280,000 ~ 110,000 =170,000 short mess |B — | CGS-2011 = 1,040,000; CGS-2012 =1.550,000; total CGS (2011 and 2012) = 2.59M 2011 and 2012 sales = 1,700,000 + 2,000,000 = 3,700,000; 2.59/3.7 = 70% 520,000 + 2,180,000 - (2.500.000 x 70%) = 950,000 {950,000 ~ (70% x 150.000) ~ 95.000 = 750.000 Mc39__|D | 408,8976 + 524,200 = 78%; 450,200 — 5,100 = 445, 100; 445, 100 x 78% = 347,178 105,650 + (378.245 ~ 10.295) = 473.600: 473.600 - 347.178 =126.422 35Chapter 4 = Inventories 126,422 — 69.738 — 5,000 = 51,684 McaI0 "400,000 + 1,280,000 -740,000 = 940,000 Direct materials used {940.000 + 960,000 + (50%x 906,000) = 2.3180,000 Total mfg. Cost 4,000,000 x 75% = 3,000,000 Cast of goods sold. 3,000,000 + 1,310,000 — 1,500,000 = 2,810,000 Cost of goods avail for sale 2,380,000 + 1,100,000 ~ 2,810,000 = 670,000 MCaI 617,000 + 1,281,000 ~ 21,000 + 31,000 = 1,908,000 Avail for sale at cost 1,057,000 + 2,188,000 - 35,000 = 3, 180,000 Avail for sale at retail 1,908,000 = 3,180,000 = 60% Cost to retail ratio 3,180,000 - 2,365,000 + 62,000 = 877,000; 877,000 ~ 780,000 = 97,000 97.000 x 60% = 58.200 MCaa 47,075 + 213,327 + 3,400 = 263,802 Avail for sale at cost 70,025 + 306.375 = 18.900 ~ 7.800 ~ 10.640 = 376,860 Avail for sale at retail 263,802 + 376,860 = 70%: 320.500 x 70% = 224.350 Mcas 376,860 ~ 320,500 = 56,360; 56,360 - 39,390 = 16,970: 16.970 x 70% = 11,879, Mca4 23,000 + 120,000 = 143,000: 60,000 + 220,000 + 20,000 — 40,000 = 260,000 260,000 ~ 180,000 = 80.000; 143,000/260.000 = 55%: 55.000 P 80,000 =44.000 MCa5 {600,000 — 10,000 ~ 4,000 ~ 100,000 = 486,000 36