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PROBLEM NO. 1 - Malabon, Inc.

Question No. 1 - B
Accounts receivable on December 31 375,000
Add - Write-offs 10,000
Collections 3,000,000 3,010,000
Total 3,385,000
Less - Accounts receivable on January 1 135,000
Sales for 2005 3,250,000
Question No. 2 - B
Accounts payable on December 31 300,000
Add - Payments for merchandise 2,000,000
Total 2,300,000
Less - Accounts payable on January 1 375,000
Purchases for 2005 1,925,000
Question No. 3 - B
Inventory, January 1 (at cost) 375,000
Add - Purchases 1,925,000
Total goods available for sale 2,300,000
Less - Cost of sales (3,250,000 x 60%) 1,950,000
Estimated inventory at cost 350,000
Less - Inventory, December 31 (at cost) 244,000
Estimated inventory shortage 106,000

PROBLEM NO. 2 - Navotas Company

Inventory Inventory
July 1, 2004 Purchases June 30, 2005
Unadjusted balances 125,000 900,000 175,000
Add (deduct) adjustments:
a 32,500 - -
b - (13,500) -
c - 46,500 46,500
d - - 18,500
e - 27,000 -
f - - -
Adjusted balances 157,500 960,000 240,000
(1) (2) (3)
1 B
2 B
3 C
4 A
Inventory, July 1, 2004 (see no. 1) 157,500
Add - Purchases (see no. 2) 960,000
Total goods available for sale 1,117,500
Less - Inventory, June 30, 2005 (see no. 3) 240,000
Cost of goods sold 877,500

5 D
Inventory, 7/1/04 32,500
Inventory, 6/30/05 65,000
Purchases 60,000
Accounts receivable 44,000
Retained earnings 19,000
Vouchers payable 73,500
Cost of sales 65,000
Sales 44,000
Compound adjusting journal entry as of 6/30/05
PROBLEM NO. 3 - Caloocan Corporation

Question No. 1 - A
Cash balance, 1/1/05 200,000
Add : Sales (squeeze) 1,840,000
Collection of notes receivable 50,000 1,890,000
Total 2,090,000
Less: Cash paid for operating expenses 440,000
Cash paid on accounts payable 943,400 1,383,400
Cash balance, 12/31/05 706,600
Units sold (P1,840,000/P100) 18,400

Question No. 2 - A
Accounts payable, 1/1/05 150,000
Add purchases*:
Month Unit cost Quantity Total cost
January 65.20 1,500 97,800
February 65.40 1,500 98,100
March 65.60 1,500 98,400
April 65.80 1,500 98,700
May 66.00 1,500 99,000
June 66.20 1,500 99,300
July 66.40 1,500 99,600
August 66.60 1,500 99,900
September 66.80 1,500 100,200
October 67.00 1,500 100,500
November 67.20 1,500 100,800
December 67.40 1,500 101,100 1,193,400 *
Total 18,000 1,343,400
Less cash paid on accounts payable 943,400
Accounts payable, 12/31/05 400,000
* alternative computation [(P65.20+P67.40)/2] x (1,500 units x 12 months)

Question No. 3 - A
Inventory quantity, 1/1/05 (P399,750/P65.00) 6,150
Add purchases (see no. 2) 18,000
Units available for sale 24,150
Less units sold (see no. 1) 18,400
Inventory quantity, 12/31/05 5,750

Question No. 5
Purchase from Quantity Unit cost Total cost
December 1,500 67.40 101,100
November 1,500 67.20 100,800
October 1,500 67.00 100,500
September (squeeze) 1,250 66.80 83,500
5,750 385,900
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PROBLEM NO. 4 - Valenzuela Manufacturing Co.

Question no. 1 - A

Inventory per books, 11/30/05 1,695,960

Add understatement of booked inventory 84,000
Physical inventory,11/30/05, per client 1,779,960
Add (deduct) adjustments
Overstatement due to pricing errors (61,600)
Understatement due to footing and extension errors 4,200
Obsolete materials (7,000)
Inventory per physical count, as adjusted 1,715,560

Question no. 2 - A

Adjusted balance of inventory, 11/30 1,715,560

Add: Purchases 691,600
Direct labor 338,800
Factory overhead (200% of direct labor) 677,600
Total 3,423,560
Less cost of sales:
Per books 1,920,800
Obsolete materials written off through COS (7,000) 1,913,800
Inventory, 12/31/05 1,509,760

3C
4C
5B
Breakdown of inventory per element:
Inventory, 11/30/05 (see no. 1) 1,715,560
Less: Direct labor 280,000
Factory overhead (200% of direct labor) 560,000 840,000
Raw materials, 11/30 875,560
Add: Purchases 691,600
Total 1,567,160
Less: Materials included in cost of sales
Cost of sales (see no. 2) 1,913,800
Less: Direct labor 386,400
Factory overhead 772,800 1,159,200 754,600
Cost of materials on hand and materials included in WIP 812,560 (3)
Labor cost in the WIP:
Labor included in 11/30 inventory 280,000
Add: Labor incurred in December 338,800
Total 618,800
Less: Labor included in COS 386,400 232,400 (4)
Applied factory overhead (200% of direct labor) 464,800 (5)
Total, as shown in no.2 1,509,760