Item in FS FS

1. Goods out on consignment at Inventory SFP

another company’s store.
2. Goods sold on an installment basis Cost of Goods Sold SCI
(bad debts can be reasonably
estimated).
3. Goods purchased F.O.B. shipping Inventory SFP
point that is in transit at December 31.
4. Goods purchased F.O.B. destination Not reported Not reported
that is in transit at December 31.
5. Goods sold to another company, for
which our company has signed an
agreement to repurchase at a set price Inventory SFP
that covers all costs related to the
inventory.
6. Goods sold where substantial Cost of Goods Sold SCI
returns are predictable.
7. Goods sold F.O.B. shipping point Cost of Goods Sold SCI
that is in transit at December 31.
8. Freight charges on goods Inventory SFP
purchased.
9. Interest costs incurred for
inventories that are routinely Interest expense SCI
manufactured.
10. Costs incurred to advertise goods
held for resale. Advertising expense SCI
11. Materials on hand not yet placed
into production by a manufacturing Inventory SFP
firm.
12. Office supplies. Office supplies SFP
13. Raw materials on which a
manufacturing firm has started Inventory SFP
production but which are not
completely processed.
14. Factory supplies. Inventory SFP

15. Goods held on consignment from Not reported Not reported

another company.
16. Costs identified with units
completed by a manufacturing firm but Inventory SFP
not yet sold.
17. Goods sold f.o.b. destination that Inventory SFP
is in transit at December 31.
18. Short-term investment is stocks
and bonds that will be resold in the Short-term investment SFP
near future.

INVENTORY ACTIVITIES
Let’s Check – EXERCISE 2 (Adapted)

Let’s Analyze
Problem 7 – Vangie Company
Requirement 1
A) Periodic Inventory system
a. Purchased merchandise amounting to P100,000. Terms: 2/10, n/30.

Purchases 100,000

Accounts Payable 100,000

b. Sold merchandise to various customers, P125,000. Cost of merchandise sold, P65,000.

Cash 125,000
125,00
Sales 0

c. Approved and accepted the return of merchandise from customer due to wrong
delivery, P12,000. The cost of the inventory is P8,000.

Sales Returns and allowances 12,000

Accounts receivable 12,000

d. Paid freight for merchandise sold, P12,000.

Freight out 12,000

12,00
Cash 0

e. Returned merchandise to suppliers due to damages, P15,000.

Accounts Payable 15,000

Purchase Returns 15,000

f. Acquired merchandise from various suppliers, P180,000. Terms: less 10%, 2/10, n/30.

Purchases 180,000

Accounts Payable 180,000

g. Paid accounts payable to various suppliers amounting to P90,000 less 2% discount

taken.

Accounts Payable 90,000

Purchase discount 1,800
Cash 88,200

h. Sold merchandise to various customers, P90,000. Cost of merchandise sold, P55,000.

Cash 90,000
Sales 90,000
i. Received proceeds from accounts receivable collection amounted to P100,000, net of
2%
discounts.

Cash 100,000
Accounts Receivable 100,000

j. Paid freight for merchandise purchased, P18,000.

Freight-in 18,000

Cash 18,000

B) Perpetual Inventory

a. Purchased merchandise amounting to P100,000. Terms: 2/10, n/30.

Merchandise Inventory 100,000

Accounts Payable 100,000

b. Sold merchandise to various customers, P125,000. Cost of merchandise sold, P65,000.

Cash 125,000
Sales 125,000

Cost of Goods Sold 65,000

Merchandise Inventory 65,000

c. Approved and accepted the return of merchandise from customer due to wrong
delivery,
P12,000. The cost of the inventory is P8,000.

Sales Returns and allowances 12,000

Accounts receivable 12,000

Merchandise Inventory 8,000

Cost of Goods Sold 8,000

d. Paid freight for merchandise sold, P12,000.

Merchandise Inventory 12,000

Cash 12,000

e. Returned merchandise to suppliers due to damages, P15,000.

Accounts Payable 15,000

 Merchandise Inventory 15,000

f. Acquired merchandise from various suppliers, P180,000. Terms: less 10%, 2/10, n/30.

Merchandise Inventory 180,000

Accounts Payable 180,000

g. Paid accounts payable to various suppliers amounting to P90,000 less 2% discount

taken.

Accounts Payable 90,000

Merchandise Inventory 1,800
Cash 88,200

h. Sold merchandise to various customers, P90,000. Cost of merchandise sold, P55,000.

Cash 90,000
Sales 90,000

Cost of Goods Sold 55,000

Merchandise Inventory 55,000

i. Received proceeds from accounts receivable collection amounted to P100,000, net of

2% discounts.

Cash 100,000
Accounts Receivable 100,000

j. Paid freight for merchandise purchased, P18,000.

Merchandise Inventory 18,000

Cash 18,000

Problem 8 – Editah Company

Solution:

Accounts Accounts
  Cash Receivable Inventory Payable
Beg.
Amounts P 963,200 P 2,254,000 P 6,050,000 P 4,201,000
1 (654,600) 310,000    
2 360,000     372,400
3a       (175,000)
3b     130,000  
3c     (637,500)  
3d     217,500 217,500
3e     275,000  
3f  - - - -
TOTAL P 668,600 P 2,564,000 P 6,035,000 P 4,615,900

Adjusting entries (solution)

1 Accounts Receivable (294,500 ÷95%) 310,000

Sales 360,000
Cash 654,600
Sales Discount (294,500 ÷95% x 0.05) 15,500

2 Cash 360,000
Purchase Discount 12,400
Accounts Payable 372,400

3a Accounts Payable 175,000

Cost of Goods Sold 175,000

3b Inventory 130,000
Cost of Goods Sold 130,000

3c Cost of Goods Sold 637,500

Inventory 637,500

3d Inventory 217,500
Accounts Payable 217,500

3e Inventory 275,000
Cost of Goods Sold 275,500

3f No adjusting entry
Problem 9 – Angel Company
1. Specific Identification

Ending inventory = 6,000 x 21.50 = P 129,000

COGS:
Beginning inventory (5,000 units x
20.00) 100,000
*Purchases 234,500
Total goods available for sale 334,500
Less: Ending inventory 129,000
COGS 205,500

*Purchases (Solution)
June 10 - 6,000 x 21.50 = 129,000
June 13 - 3,000 x 20.50 = 61,500
June 25 - 2,000 x 22.00 = 44,000
Total purchases = 234,000

2. FIFO – Periodic

Inventory, 6,000 units

2,000 x 22.00
25-Jun = 44,000
4,000 x 21.50
10-Jun = 86,000
Total Ending inventory 130,000

COGS:
Beginning inventory (5,000 units x 20.00) 100,000
*Purchases 234,500
Total goods available for sale 334,500
Less: Ending inventory 130,000
COGS 204,500

3. FIFO – Perpetual

Date Purchases Sales Balance

Unit Total Unit Total
JUNE Units Unit Cost Total cost Units Cost cost Units Cost cost
1 5,000 20 5,000 20 100,000
3 3,000 20 6,000 2,000 20 40,000
2,000 20 40,000
10 6,000 21.5 129,000 6,000 21.5 129,000
13 3,000 20.5 61,500 3,000 20.5 61,500
20 1,500 20 30,000 500 20 100,000
6,000 21.5 129,000
3,000 20.5 61,500
25 2,000 22 44,000 2,000 22 44,000
500 20 100,000
28 5,000 21.5 107,500 1,000 21.5 21,500
 3,000 20.5 61,500
2,000 22 44,000
1,000 21.5 21,500
30 1,500 20.5 30,750 1,500 21 30,750
            2,000 22 44,000
234,500 COGS - 295,750 Ending Inventory - 74,750

4. Weighted Average

Units UC Total Cost

Beginning balance 5,000 20 100,000
June10 6,000 21.50 129,000
13 3,000 20.50 61,500
25 2,000 22 44,000
TOTAL 16,000 334,500

Weighted-average cost = 334,500

16,000
= 20.9

Ending Inventory = 6,000 units X 20.90 = 125,400

COGS:
Beginning inventory (5,000 units x 20.00) 100,000
*Purchases 234,500
Total goods available for sale 334,500
(125,400
Less: Ending inventory )
COGS 209,100

5. Moving Average

Date Units Unit cost Total cost

JUNE
1 5,000 20 100,000

3 3,000 20 60,000
2,000 20 40,000
10 6,000 21.5 129,000
8,000 21.5 169,000
13 3,000 20.5 61,500
11,000 20.95 230,500
20 1,500 20.95 31,425
9,500 20.95 199,075
25 2,000 22 44,000
11,500 21 243,075
 28 5,500 21 115,500
6,000 21 127,575
30 2,500 21 52,500
Inventory, end 3,500 21 75,075

Moving Average

Inventory, beg 100,000

Purchases 234,500
Total GAS 334,500
Cost of Goods Sold 259,425
Inventory, end 75,075

Problem 10 – Juan Company

1. Determine the valuation of the inventory as of December 31, 2020.

A B C (AB) (AC)
Inventory Quantity Cost per Unit NRV Total cost Total NRV LCNRV
A1001* 1,000 P 56 P6 56,000 6,000 6,000
A1005 4,100 61 59 250,100 241,900 241,900
A1010 500 98 85 49,000 42,500 42,500
A1014 1,200 15 16 18,000 19,200 18,000
A1021 3,250 35 37 113,750 120,250 113,750
A1022 750 20 26 15,000 19,500 15,000
A1030 1,350 39 35 52,650 47,250 47,250
554,500 496,600 484,400

Problem 11 – Mikaela Enterprises Ltd.

a.
Mikaela Enterprises Ltd:
Income Statement
February, March, and April 2XXX

February March April

Sales 29,000 35,000 40,000
Cost of Goods Sold
Inventory, Beginning 25,000 25,100 29,000
Purchases 20,000 24,000 26,500
Cost of Goods Available 45,000 49,100 55,500
Inventory, Ending 25,100 29,000 23,000
COGS 19,900 20,100 32,500
Gross Profit 9,100 14,900 7,500
Gain or Loss (7,000) 1,100 700
2,100 16,000 8,200
------------------------------------------------------------------------------------------------------------------------------

January 31 February 28 March 31 April 30

Inventory cost P 25,000 P 25,100 P 29,000 P 23,000
Less: Inventory at LCNRV 24,500 17,600 22,600 17,300
Allowance reduced inventory to NRV P 500 7,500 6,400 5,700
Gain or Loss P (7,000) P 1,100 P 700

Solution:
-7,000
500 - 7,500 =
7,500 - 6,400 = 1,100
6,400 - 5,700 = 700

b. Prepare the journal entry that is needed to establish the valuation account on January 31.
Also,
prepare the journal entries to adjust it at the end of each month after that.

Jan/31/2x Loss Due to Decline of Inventory to NRV 500

Allowance to reduce Inventory to NRV 500

Feb/28/2x Loss Due to Decline of Inventory to NRV 7,000

Allowance to reduce Inventory to NRV 7,000

Mar/31/2x Allowance to Reduce Inventory to NRV 1,100

Recovery of Inventory Loss 1,100

Apr/30/2x Allowance to Reduce Inventory to NRV 700

Recovery of Inventory Loss 700

Problem 12 – Eddie Furniture Company

Requirement 1: Gross profit realized in 2020

No. of Total sales Cost Cost per

Type of chairs chairs Selling price price Ratio Total Cost Allocated chair
Lounge chairs 400 90 36,000 36,000/95,000 59,850 22,680 56.70
Arm chairs 300 80 24,000 24,000/95,000 59,850 15,120 50.40
Straight chairs 700 50 35,000 35,000/95,000 59,850 22,050 31.50
95,000 59,850

Type of Cost per Cost of chair Gross

chairs Chairs sold chair sold Sales Profit
 Lounge chairs 200 56.70 11,340 18,000 6,660
Arm chairs 100 50.40 5,040 8,000 2,960
Straight chairs 120 31.50 3,780 6,000 2,220
20,160 32,000 11,840

Gross profit realized in 2020 is Php 11,840

Requirement 2: Unsold straight chairs on December 31, 2020

Solution:
Straight chairs – 700
Sold straight chairs – 120
Cost of straight chairs – Php 31.50

Amount unsold straight chairs = (700-120) x 31. 50

= 580 x 31.50
Amount unsold straight chairs = Php 18,270
-------------------------------------------------------------------------------------------------------------------------------
Problem 13 – Juan Gabriel Company

Requirement 1:

Total cost production 8,750,000

Divide:
CLASS A 10,500,000
CLASS B 3,000,000 13,500,000
COST RATIO 0.65

Class A = 50,000 x 70% = 35,000 x 300 = 10,500,000

Class B = 50,000 X 30% = 15,000 X 200 = 3,000,000

0.65 = 65%

Class A
10,500,000 X 65% = 6,825,000

Class B
3,000,000 X 65% = 1,950,000

CLASS A (3,000 X 300 X 65%) 585,000

CLASS B (4,500 X 200 X 65%) 585,000
 Inventory costs 1,170,000

Problem 14 – Mimi Company

Requirement:
1. What entry would you make on December 31, 2020, to recognize these facts?

31-Dec Loss on Purchase Commitment 80,000

Estimated Liability for Purchase Com. 80,000

2. 780,000 is the market price