PROBLEM 2(2points each)

You are engaged in checking the transactions and books of Makina Co. for the
year 2019. To reduce the workload at year-end, the company took its annual
physical inventory under your observation on Nov 30, 2019.

The company's inventory account, which includes raw materials and work in
process, is on perpetual basis and it uses the FIFO method of pricing.
it ha no finished goods inventory account.

The company's physical inventory revealed that the book inventory of

181,710.00 was undersated by 9,000.00 . To avoid distorting the
interim financial statements, the company decided not to adjust the book
inventory until year-end excecpt for obsolete items.

You found out this information about the Nov 30 inventory.

a. Pricing tests showed that the physical inventory was overpriced by 6,600.00

b. Footing and extension errors resulted in a 450.00 understatement

of the physical inventory.

c. Direct labor included in the physical inventory amounted to 30,000.00 .

overhead was included at the rate of 200% of direct labor. You determined that
the amount of direct labor and the overheadrate was proper.

d. The physical inventory included obsolete materials recorded at P750.

During December, these materials were removed from the inventory account
by a charge to cost of sales. Your checking also disclosed the following
information about December 31, 2019 inventory.
Total debits to certain accounts during december are:
Purchases 74,100.00
Direct labor 36,300.00
Manufacturing overhead expense 75,600.00
Cost of sales 205,800.00

e. The cost of sales of 205,800.00 included direct labor of 41,400.00

f. Normal scrap loss on established product lines are negligible. However, a special
order started and completed during december had excessive scrap loss of 2,400,
which was charged to Manufacturing overhead Control.

Questions:
5. What is the inventory per physical count o Nov 30, 2019.
6. What is the correct amount of physical inventory at Nov 30, 2019.

Assumption: Without prejudice to your answers to questions 5&6, assume that

the correct amount of the inventory at November 30, 2019 was 173,100.00
7.What is the materials inventory at December 31, 2019
8. What is the amount oof direct labor cost included in the December 31, 2019
inventory?
9. What is the correct inventory at December 31, 2016?