PROBLEM 1

Presented below is a list of items that may or may not reported as inventory in a company’s
December 31 balance sheet of OMEGA Company.

1. Goods out on consignment at another company’s store P800,000

2. Goods sold on installment basis 100,000
3. Goods purchased f.o.b. shipping point that are in transit at
December 31 120,000
4. Goods purchased f.o.b. destination that are in transit at
December 31 200,000
5. Goods sold to another company, for which our company has
signed an agreement to repurchase at a set price that
covers all costs related to the inventory 300,000
6. Goods sold where large returns are predictable 280,000
7. Goods sold f.o.b. shipping point that are in transit December
31 120,000
8. Freight charges on goods purchased 80,000
9. Factory labor costs incurred on goods still unsold 50,000
10. Interest cost incurred for inventories that are routinely
manufactured 40,000
11. Costs incurred to advertise goods held for resale 20,000
12. Materials on hand not yet placed into production 350,000
13. Office supplies 10,000
14. Raw materials on which the company has started production,
but which are not completely processed 280,000
15. Factory supplies 20,000
16. Goods held on consignment from another company 450,000
17. Costs identified with units completed but not yet sold 260,000
18. Goods sold f.o.b. destination that are in transit at
December 31 40,000
19. Temporary investment in stocks and bonds that will be
resold in the near future 500,000

Determine: Total amount of inventory

PROBLEM 2
Items available in DELTA Company as of December 31, 2020 with regard to inventories are as
follows:
(a) A packing case containing a product costing P100,000 was standing in the shipping room when
the physical inventory was taken. It was not included in the inventory because it was marked “Hold
for shipping instructions.” The customer’s order was dated December 18, but the case was
shipped and the costumer billed on January 10, 2021.

(b) Merchandise costing P600,000 was received on December 28, 2020, and the invoice was
recorded. The invoice was in the hands of the purchasing agent; it was marked “On consignment”.

(c) Merchandise received on January 6, 2021, costing P700,000 was entered in purchase register
on January 7. The invoice showed shipment was made FOB shipping point on December 31, 2020.
Because it was not on hand during the inventory count, it was not included.

(d) A special machine costing P200,000, fabricated to order for a particular customer, was finished in
the shipping room on December 30. The customer was billed for P300,000 on that date and the
machine was excluded from inventory although it was shipped January 4, 2021.

(e) Merchandise costing P200,000 was received on January 6, 2021, and the related purchase invoice
was recorded January 5. The invoice showed the shipment was made on December 29, 2020,
FOB destination.

(f) Merchandise costing P150,000 was sold on an installment basis on December 15. The customer
took possession of the goods on that date. The merchandise was included in inventory because
Alcala still holds legal title. Historical experience suggests that full payment on installment sale is
received approximately 99% of the time.

(g) Goods costing P500,000 were sold and delivered on December 20. The goods were included in
the inventory because the sale was accompanied by a purchase agreement requiring DELTA to
buy back the inventory in February 2021.

Determine: Total amount of inventory included in the December 31, 2020 balance.
PROBLEM 3
ALPHA Company Company engaged you to examine its books and records for the fiscal year ended
June 30, 2021. The company’s accountant has furnished you not only the copy of trial balance as of
June 30, 2021 but also the copy of company’s balance sheet and income statement as at said date.
The following data appears in the cost of goods sold section of the income statement:

Inventory, July 1, 2020 P 500,000

Add Purchases 3,600,000
Total goods available for sale 4,100,000
Less Inventory, June 30, 2021 700,000
Cost of goods sold P3,400,000

The beginning and ending inventories of the year were ascertained thru physical count except that
no reconciling items were considered. Even though the books have been closed, your working paper
trial balance show all account with activity during the year. All purchases are FOB shipping point. The
company is on a periodic inventory basis.

In your examination of inventory cut-offs at the beginning and end of the year, you took note of the
following:
July 1, 2020
a. June invoices totaling to P130,000 were entered in the voucher register in
June.
The corresponding goods not received until July.
b. Invoices totaling P54,000 were entered in the voucher register in July but the goods received
during June.
June 30, 2021
c. Invoices with an aggregate value of P186,000 were entered in the voucher register in July, and
the goods were received in July. The invoices, however, were date June.
d. June invoices totaling P74,000 were entered in the voucher register in June but the goods were
not received until July.
e. Invoices totaling P108,000 (the corresponding goods for which were received in June) were
entered the voucher register, July.
f. Sales on account in the total amount of P176,000 were made on June 30 and the goods
delivered at that time. Book entries relating to the sales were made in June.

Determine the following:

1. Adjusted Inventory - July 1, 2020
2. Adjusted Purchases - June 30, 2021
3. Adjusted Inventory - June 30, 2021
4. Adjusted COGS - June 30, 2021