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FINANCIAL ACCOUNTING AND REPORTING

WEEKLY QUIZ NO. 2 – TOPICS 2902 TO 2904 OCTOBER 2020 CPALE

MULTIPLE CHOICE Dec. 02 Sold 300 bicycles for P1,200 each.

03 Five bicycles were returned by a customer.
1. Which of the following items should be included in a They had originally cost P820 each and were
company's inventory at the statement of financial sold for P1,200 each.
position date? 09 Purchased 55 bicycles at P910 each.
A. Goods in transit which were purchased f.o.b. 13 Purchased 76 bicycles at P960 each.
destination. 15 Sold 86 bicycles for P1,350 each.
B. Goods received from another company for sale on 16 Returned one damaged bicycles to the
consignment. supplier. This bicycle had been purchased on
C. Goods sold to a customer which are being held for 9 December.
the customer to call for at his or her convenience. 22 Sold 60 bicycles for P1,250 each.
D. None of these. 26 Purchased 72 bicycles at P980 each.
29 Two bicycles, sold on 22 December, were
2. Which of the following would not be included in the returned by a customer. The bicycles were
cost of work in process inventory? badly damaged so it was decided to write
A. Cost of electricity to operate factory equipment them off. They had originally cost P910 each.
B. Maintenance costs of factory equipment
C. Depreciation on office equipment in the sales 5. The cost of goods sold for the month of December
manager's office using moving average method is (Round unit costs to
D. Depreciation on factory equipment the nearest peso)
A. P367,230 C. P366,320
3. The cost of inventories of items that are not ordinarily B. P365,410 D. P372,725
interchangeable shall be assigned by using
A. Specific identification of their individual costs 6. The cost of goods sold for the month of December
B. First-in, first-out (FIFO) using FIFO method is
C. Weighted average cost formula A. P367,230 C. P366,320
D. Any of these B. P365,410 D. P372,725

4. Which of the following is incorrect regarding the 7. How should sales staff commission be dealt with when
implications of COVID-19 in accounting for valuing inventories at the lower of cost and net
inventories? realizable value (NRV), according to PAS2 Inventories?
A. It might be necessary to write-down inventories to A. Ignored
net realizable value. B. Added to cost
B. Reduced production might affect the extent to C. Deducted in arriving at NRV
which overheads can be included in the cost of D. Deducted from cost
inventory.
C. Entities should assess the significance of any 8. The net realizable value of the quantity of inventory
write-downs and whether they require disclosure held to satisfy firm sales or service contracts is based
in accordance with PAS 2. on the
D. Capitalization of borrowing costs on inventories A. Contract price.
that are manufactured in large quantities on a B. General selling prices.
repetitive basis may need to be suspended. C. Quoted prices in an active market for identical
assets.
D. Quoted prices in an active market for similar
Use the following information for the next two questions. assets.
Orang Dampuan Co. wholesales bicycles. It uses the
9. According to the net method, which of the following
perpetual inventory system. The company's reporting
items should be included in the cost of inventory?
date is December 31. At December 1, inventory on hand
Freight costs Purchase discounts not taken
consisted of 350 bicycles at P820 each and 43 bicycles at
A. Yes No
P850 each. During the month of December, the following
B. Yes Yes
inventory transactions took place (all purchase and sales
C. No Yes
transactions are on credit):
D. No No

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10. On November 20, 2020, Hylos Corporation entered SITUATIONAL

into a non-cancellable contract to purchase P100,000
of inventory on January 15, 2021. The value of the Information relevant to five different companies follows.
inventory on December 31, 2020, Hylos’ year end,
was P90,000. What amount should be reported on • The following figures relate to Myra Corp.’s inventory
the statement of financial position at December 31 held at 31 March 2020:
related to this purchase commitment? Product A Product B
A. P10,000 estimated liability on purchase Units held 2,000 5,000
commitment Cost per unit P14 P16
B. P100,000 accounts payable Selling price P17 P20
C. P90,000 purchase commitment liability
D. P90,000 inventory Modifications costing P5 per unit would need to be
made to product A to achieve the selling price of P17.
11. Which of the following is an agricultural activity?
A. Ocean fishing • On June 30, 2020, a flash flood damaged the
B. Deforestation warehouse and factory of Entity P, completely
C. Fish farming destroying the work in process inventory. There was
D. All of the above no damage to either the raw materials or finished
goods inventories. A physical inventory taken after
12. Which of the following is not a biological asset? the flood revealed the following valuations:
A. Sheep Finished Goods P112,000
B. Trees in a timber plantation Work-in-process 0
C. Dairy cattle Raw Materials 52,000
D. Sugar
The inventory on January 1, 2020, consisted of the
13. Which statement is incorrect regarding PFRS 13? following.
A. It defines fair value. Finished Goods P120,000
B. It sets out in a single PFRS a framework for Work-in-process 115,000
measuring fair value. Raw Materials 42,500
C. It requires disclosures about fair value P277,500
measurements.
D. It identifies the items that should be measured at A review of the books and records disclosed that the
fair value. gross profit margin historically approximated 34% of
sales. The sales for the first 6 months of 2020 were
14. Entity A had a plantation forest that is likely to be P428,000. Raw materials purchases were P96,000.
harvested and sold in 30 years. The income should be Direct labor costs for this period were P130,000, and
accounted for in the following way: manufacturing overhead has historically been applied
A. No income should be reported until first harvest at 60% of direct labor.
and sale in 30 years.
B. Income should be measured annually and • The records of Cloy Corp. report the following data for
reported using a fair value approach that the month of January:
recognizes and measures biological growth. Beginning inventory at cost P 440,000
C. The eventual sale proceeds should be estimated Beginning inventory at sales price 800,000
and matched to the profit and loss account over Purchases at cost 4,500,000
the 30-year period. Initial markup on purchases 2,900,000
D. The plantation forest should be valued every 5 Purchase returns at cost 240,000
years and the increase in value should be shown Purchase returns at sales price 350,000
in the statement of profit or loss. Freight on purchases 100,000
Additional mark up 250,000
15. Costs to sell include Mark up cancellations 100,000
A. Finance costs. Mark down 600,000
B. Income taxes. Mark down cancellations 100,000
C. Transport and other costs necessary to get assets Sales 5,300,000
to a market. Sales allowances 300,000
D. Transfer taxes and duties. Sales returns 400,000
Employee discounts 200,000
Theft and other losses 100,000

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• The following pertains to an Organic Corp.’s biological

assets:
Fair value based on unobservable inputs
for the asset P4,900
Quoted price in an active market for
similar asset 5,400
Quoted price in an active market for
identical asset 5,300
Selling price in a binding contract to sell 5,600
Estimated commissions to brokers and
dealers 500
Estimated transport and other costs
necessary to get asset to the market 300

• The following pertains to the biological assets owned

by ABC Farms, Inc.:
Carrying amount at January 1 P459,570
Purchases 26,250
Gain arising from changes in fair value
less costs to sell attributable to
physical changes 15,350
Gain arising from changes in fair value
less costs to sell attributable to
price changes 24,580
Sales 100,700

16. What is the value of Myra Corp.’s inventory held at 31

March 2020 in accordance with PAS 2 Inventories?
A. P104,000 C. P114,000
B. P108,000 D. P124,000

17. Compute the value of Entity P’s work in process

inventory lost on June 30, 2020.
A. P135,020 C. P271,980
B. P119,020 D. P 92,220

18. Using the average retail inventory method, Cloy

Corp.’s ending inventory at cost is
A. P1,024,000 C. P1,536,000
B. P1,472,000 D. P1,664,000

19. Organic Corp.’s biological assets should be valued at

A. P4,800 C. P4,500
B. P4,600 D. P4,400

20. The carrying amount of ABC Farms, Inc.’s biological

assets on December 31 is
A. P425,050 C. P525,750
B. P499,500 D. P451,300

J - end - J

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ANSWER KEY:

1. D
2. C
3. A
4. D
5. D
6. A
7. C
8. A
9. A
10. A
11. C
12. D
13. D
14. B
15. D
16. A
17. A
18. B
19. C
20. A

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