PROBLEM NO.

1A
A flood recently destroyed many of the financial records of Bulls
ManufacturingCompany. Management has hired you to re-create as much financial
information aspossible for a month of July. You are able to find out that the company
uses an averagecost inventory valuation system. You also learn that Bulls makes a
physical count at theend of each month in order to determine monthly ending inventory
values. By examiningvarious documents you are able to gather the following information:

Ending inventory at July 31 50,000 units

Total cost of unit available for sale in July P118,800
Cost of goods sold during July P99,000
Cost of beginning inventory, July 1 P0.35 per unit
Gross profit on sales for July P101,000

July purchases
Date Units Unit Cost
July 5 60,000 P0.40
11 50,000 0.41
15 40,000 0.42
16 50,000 0.45

QUESTIONS:
Based on the above and the result of your engagement, you are asked to provide
thefollowing information:
1. Number of units on hand, July 1
100,000
2. Units sold during July
P250,000
3.Unit cost of inventory at July 31
P0.396
4.Value of inventory at July 31
P19,800

PROBLEM NO. 2A
Pacers Company, a manufacturer of small tools, provided the following information
fromits accounting records for the year ended December 31, 2006:

Inventory at December 31, 2006 (based on physical

count onDecember 31, 2006) P1,520,000
Accounts payable at December 31, 2006 1,200,000
Net sales (sales less sales returns) 8,150,000

Additional information follows:

a. Included in the physical count were tools billed to a customer FOB shipping point
onDecember 31, 2006. These tools had a cost of P31,000 and were billed at P40,000.
The shipment was on Pacers’ loading dock waiting to be picked up by the common
carrier.
b. Goods were in transit from a vendor to Pacers on December 31, 2006. The
invoicecost was P71,000, and the goods were shipped FOB shipping point on December
29,2006.
c. Work in process inventory costing P30,000 was sent to an outside processor
forplating on December 30, 2006.
d. Tools returned by customers and held pending inspection in the returned goods
areaon December 31, 2006, were not included in the physical count. On January 8,
2007,the tools costing P32,000 were inspected and returned to inventory. Credit
memostotaling P47,000 were issued to the customers on the same date.
e. Tools shipped to a customer FOB destination on December 26, 2006, were in transitat
December 31, 2006, and had a cost of P21,000. Upon notification of receipt by
thecustomer on January 2, 2007, Pacers issued a sales invoice for P42,000.
f. Goods, with an invoice cost of P27,000, received from a vendor at 5:00 p.m.
onDecember 31, 2006, were recorded on a receiving report dated January 2, 2007.
Thegoods were not included in the physical count, but the invoice was included
inaccounts payable at December 31, 2006.
g. Goods received from a vendor on December 26, 2006, were included in the
physicalcount. However, the related P56,000 vendor invoice was not included in
accountspayable at December 31, 2006, because the accounts payable copy of the
receivingreport was lost.
h. On January 3, 2007, a monthly freight bill in the amount of P6,000 was received.The
bill specifically related to merchandise purchased in December 2006, one-half ofwhich
was still in the inventory at December 31, 2006. The freight charges were notincluded in
either the inventory or accounts payable at December 31, 2006.

QUESTIONS:
Based on the above and the result of your audit, answer the following:
1. The adjusted balance of Inventory as of December 31, 2006 is
P1,704,000
2. The adjusted balance of Accounts Payable as of December 31, 2006 is
P1,333,000
3. The adjusted Net Sales fro the year ended December 31, 2006 is
P8,063,000