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Inventory Sample exercises

Bachelor of Science In Accountancy (University of San Jose - Recoletos)

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INVENTORIES: SAMPLE EXERCISES

Problems below are for your exercise. Try to solve the problems on your own first. Answers
are provided at the end part of the exercise.

1. Honor Company reported inventory on December 31, 2020 at P1,500,000 based on a

physical count of goods priced at cost, and before any necessary year-end adjustment
relating to the following:

Included in the physical count were goods billed to a customer FOB shipping point on
December 31, 2020. These goods had a cost of P30,000 and were picked up by the carrier
on January 10, 2021.

Goods shipped FOB destination on December 28, 2020 from a vendor to Honor Company
were received on January 4, 2021. The invoice cost was P50,000.

What amount should be reported as inventory on December 31, 2020? __________________

2. Empty Company reported inventory on December 31, 2020 at P2,500,000 based on

physical count priced at cost and before any necessary adjustment for the following:

Merchandise costing P100,000 shipped FOB shipping point from a vendor on December 30,
2020 was received and recorded on January 5, 2021.

Goods in the shipping area were excluded from inventory although shipment was not made
until January 4, 2021. The goods billed to the customer FOB shipping point on December
30, 2020 had a cost of P400,000.

What amount should be reported as inventory on December 31, 2020? _______________

3. The physical count conducted in the warehouse of Lenient Company at year end revealed
total cost of P3,600,000. However, the following items were excluded from the count:

 Goods sold to a customer, which are being held for the customer to call for at the
customer’s convenience with a cost of P200,000
 A packing case containing a product costing P80,000 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”.
 Goods in process costing P300,000 held by an outside processor for further
processing.

What is the correct inventory at year-end? _______________

4. On December 28, 2020, Caress Company purchased goods costing P500,000. The term is
FOB destination. These goods were received on December 31, 2020. Some of the costs
incurred in connection with the purchase of the goods were P10,0000 packaging for
shipment, P15,000 shipping and P25,000 special handling charge. On December 31, 2020,
what is the measurement of inventory? _________________

5. Childish Company provided the following information in relation to an inventory:

Materials 700,000
Storage costs of finished goods 180,000
Delivery to customers 40,000
Irrecoverable purchase taxes 60,000

At what figure should the inventory be measured? _____________

6. Wine Company recorded purchases at net amount. On December 10, the entity purchased
merchandise on account, P4,000,000, terms 2/10, n/30. The entity returned P300,000 of
the December 10 purchase and received credit on account. The account had not been paid
on December 31.

a. What amount should be recorded as purchase return? _______________

b. By how much should the account payable be adjusted on December 31?
_____________

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7. Virtue Company provided the following data for the current year:

Merchandise purchased for resale 4,000,000

Freight in 100,000
Freight out 50,000
Purchase returns 20,000
Interest on inventory loan 200,000
What is the inventoriable cost of the purchase? ______________

8. Audacity Company counted the ending inventory on December 31, 2020. The entity
reported inventory before any corrections at P2,000,000. None of the following items were
included when the total amount of the ending inventory was computed:

 P150,000 in goods located in the entity’s warehouse that are on consignment from
another entity.
 P200,000 in goods that were sold by the entity and shipped on December 30 and
were in transit on December 31, 2020.
The goods were received by the customer on January 2, 2021. Terms were FOB
destination.
 P300,000 in goods that were purchased by the entity and shipped on December 30
and were in transit on December 31, 2020.
The goods were received by the entity on January 2, 2021. Terms were FOB
shipping point.
 P400,000 in goods that were sold by the entity and shipped on December 30 and
were in transit on December 30, 2020.
The goods were received by the customer on January 2, 2021. Terms were FOB
shipping point.

What amount of inventory should be reported on December 31, 2020? _____________

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ANSWERS :

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