Listed below are some items of inventory from Anecito Company that are in question during

the audit. The company stores a substantial portion of the merchandise in a separate
warehouse and transfer damaged goods to a special inventory account.
1. Items in receiving department returned by customer, no communication received from
customer 20,000
2. Items ordered and in receiving department, invoice not yet received from supplier 50,000
3. Items counted in warehouse by the inventory crew 70,000
4. Invoice received for goods ordered, goods shipped but not received (Anecito Company
pays freight) 5,000
5. Items, shipped today, fob destination, invoice mailed to customer 5,000
6. Items currently used for window displays 10,000
7. Items on counter for sale per inventory count [not in (3)] 90,000
8. Items in shipping department, invoice not mailed to customer 6,000
9. Items in receiving department, refused by Anecito because of Damage [(not in (3)] 3,000
10. Items shipped today, fob shipping point, invoice mailed to customer 4,000
11. Items included in warehouse count, damaged, not returnable 8,000
12. Items included in warehouse count, specifically crafted and segregated for shipment to
customer in five days per sales contract, with return privilege. 18,000

Question:
1. If the recorded inventory in the balance sheet is P289,000, the year-end inventory will
be overstated by:
a. P 41,000 b. P 23,000 c. P 18,000 d. P 3,000
2. The following should be included from the inventory, except:
a. Inventory shipped today, f.o.b. shipping point, invoice mailed to customer.
b. Inventory counted in warehouse by the inventory crew.
c. Inventory shipped today, f.o.b. destination, invoice mailed to customer.
d. Inventory in warehouse count, specifically crafted and segregated for shipment to
customer with return privilege.
3. The inventory per audit at year-end is:
a. P 286,000 b. P 271,000 c. P 266,000 d. P 248,000