Alvarez, Pamela Joy A.

BSA-2

INVENTORIES:
Problem;
         The following information was made available by XYZ Company:
                                                                   
                                                            Cost                                 Retail

Beginning inventory                        965,000                             1,227,650

Net purchases                                2,598,657                            3,300,296
Additional markup                                                                         113,500
Markup cancellation                                                                        32,667
Markdown                                                                                         89,750
Markdown Cancellation                                                                   13,974
Sales                                                                                             2,896,745
Sales Returns                                                                                  125,697
Sales Allowance                                                                                33,255
Sales discount                                                                                   12,576

Provide an estimate of the entities ending inventory under “Conservative

method”

a. 1,362,400.60
b. 2,145,733.50
c. 1,145,733.50
d. 2,362,400.60
Solution;
                                                             Cost                   Retail
Beginning inventory                       965,000.00            1,227,650.00
Net purchases                               2,598,657.00           3,300,296.00
Additional markup                                                            113,500.00
Markup cancellation                                                           (32,667.00)

Conservative available                 3,563,657.00            4,608,779.00

goods for sale
Conservative cost-to-retail ratio                                             77.3232%

Conserv. goods avai. For sale       3,563,657.00                4,608,779.00

Markdown                                                                                 (89,750.00)
Markdown cancellation                                                            13,974.00
Conserv’ goods avai. For sale       3,563,657.00                 4,533,003.00
Less: Net sales
    (2,896,745-125,697)                                                           (2,771,048.00)

Ending inventory at retail price                                           1,761,955.00

Multiply by cost to retail ratio                                                   77.3232%

Ending inventory at cost                                                       1,362,400.60

THEORY;
1. When auditing inventories, an auditor would least likely verify that;
a. The financial statement presentation of inventories is appropriate
b. Damaged goods and obsolete items have been properly accounted for.
c. All inventory owned by the client is on hand at the time of the count.
d. The client has used proper inventory pricing

BIOLOGICAL ASSET:

Problem:
    Bear company produced milk for sale to local and national ice cream
producers. The entity began operations at the beginning of current year by
purchasing 650 milk cows for Php8,000,000.
    
  The entity provided the following information for the current year;
Acquisition cost,January 1                                                    8,000,000
Change in fair value due to growth and price changes         2,500,000
Decrease in fair value due to harvest                                       250,000
Milk harvested during the year but not yet sold                        400,000

1. What amount of gain on change in fair value should be recognized for

biological asset in the current year?
a. 2,500,000
b. 2,250,000
c. 2,900,000
d. 2,650,000
SOLUTION:
 Change in fair value due to growth and price changes                 2,500,000
Decrease in fair value due to harvest                                              (250,000)

Net gain from biological asset                                                      2,250,000

THEORY:
1. Agricultural produce harvested from bearer plant is measured, at
the point of harvest.
a. Fair value
b. Fair value less estimated point of conversion costs
c. Fair value less estimated point of sale costs
d. Fair value less estimated direct attribute acquisition costs

PROPERTY, PLANT AND EQUIPMENT:

Problem:
         Bendo’s Company recently acquired two items of equipment

*Acquired a press at invoice price of Php3,000,000 subject to a 5% cash discount

which was taken.

Costs of freight and insurance during shipment were Php50,000 and installation
cost amounted to 200,000.

*Acquired a welding machine at an invoice price of Php2,000,000 subject to a

10% cash discount which was not taken.

Additional welding supplies were acquired at a cost of Php100,000.

What total amount should be recognized as an increase in the equipment

account as a result of the transactions?
a. 4,900,000
b. 5,000,000
c. 5,100,000
d. 5,200,000

SOLUTION:
First Equipment
      Invoice price                                         3,000,000
      Discount taken-5%                                 (150,000)
      Freight and insurance                                50,000

      Installation cost                                         200,000                      3,100,000

Second Equipment
     Invoice price                                             2,000,000
     Discount not taken-10%                             (200,000)                    1,800,000

Total cost                                                                                             4,900,000

THEORY:
 1. A company purchased land to be used as the site for the construction of
a plant. Timber was cut from the building site so that construction of the
plant could begin. The proceeds from the sale of the timber should be:
a. Classified as other income
b. Netted against the costs to clear the land and expenses as incurred.
c. Deducted from the cost of the plant
d. Deducted from the cost of the land