INVENTORIES – PART 2

Problem 3-7
James Company is a wholesaler of scented candles. The activity for Item No. 1208 during June is
presented below:
Date Transaction Units Cost
June 01 Inventory balance 6,000 P20.00
04 Purchases 9,000 24.00
12 Sales 10,800
19 Purchases 14,400 26.00
22 Sales 11,400
29 Purchases 4,800 27.00

Under the FIFO periodic inventory system, how much is the ending inventory of Item No. 1208
at June 30?
a) P280,800 c) P302,400
b) P278,400 d) P316,800

Under the weighted average cost periodic inventory system, how much is the ending inventory of
Item No. 1208 at June 30?
a) P278,400 c) P302,400
b) P294,720 d) P316,800

Problem 3-8
Jordan Corporation uses the lower of cost or net realizable value inventory. Data regarding the
items in work-in-process inventory are presented below:

Markers Pens
Historical cost P24,000 P18,880
Selling price 36,000 21,800
Estimated cost to complete 4,800 4,800
Replacement cost 20,800 16,800
Normal profit margin as a percentage of
Selling price 25% 25%

What is the amount of markers inventory to be reported in Jordan’s statement of financial

position?
a) P20,800 c) P24,000
b) P23,400 d) P31,200
Problem 3-9
Bryant Company prepares monthly income statements. A physical inventory is taken only at year-
end; hence, month-end inventories must be estimated. All sales are made on account. The rate of
markup on cost is 50%. The following information relates to the month of June:

Accounts receivable, June 1 P 102,000

Accounts receivable, June 30 153,000
Collection of accounts receivable during June 255,000
Inventory, June 1 183,600
Purchases of inventory during June 163,200

How much is the estimated cost of June 30, inventory?

a) P122,400 c) P193,800
b) P142,800 d) P224,400

Problem 3-10
On the eve of June 15, 2021, a fire destroyed the entire merchandise inventory of Wade
Merchandising Corporation. The merchandise was not insured with any insurance company. The
following data were gathered:

Inventory, January 1 P 250,000

Purchases, January 1 to June 15 1,500,000
Sales, January 1 to June 15 2,000,000
Markup percentage on cost 25%

What is the approximate inventory loss as a result of the fire?

a) P150,000 c) P312,500
b) P250,000 d) P500,000

Problem 3-11
The following information is available for the Durant Company for the three months ended
March 31, 2021:

Inventory, January 1, 2021 P 1,200,000

Purchases 4,500,000
Freight-in 300,000
Sales 6,400,000

The gross margin was 25% sales.

What is the estimated inventory balance at March 31, 2021?

a) P880,000 c) P1,200,000
b) P933,000 d) P1,500,000
Problem 3-12
On December 31, 2021, a typhoon damaged a warehouse of Irving Corporation. The entire
company and many accounting records stored in the warehouse were completely destroyed.
Although the inventory was not insured, a portion could be sold for scrap. Through the use of
microfilmed records, the following data were gathered:

Inventory, January 1, P500,000; Purchases, P2,200,000; Cash sales, P273,600; Collection of

accounts receivable (including the amount of recovery), P2,520,000; Accounts receivable -
January 1; P210,000; Accounts written off, P9,600; Recovery of accounts written off, P3,600;
Allowance for bad debts – January 1, P10,500; Accounts receivable, December 31, 2014, (net of
required allowance), P342,000; Sales returns, P36,000; Sales discounts, P14,400; Purchase
returns, P60,000; Purchase discounts, P12,000; Freight in, P21,600; Salvage value of inventory,
P60,000; Gross profit percentage on sales, 32%. The Company consistently measures doubtful
accounts in percent of account receivables.

How much is the value of inventory loss?

a) P513,600 c) P538,080
b) P519,600 d) P574,080

Problem 3-13
Curry Co. uses the retail inventory method to estimate its inventory for interim statement purposes.
Data relating to the inventory computation at June 30, 2021 are as follows:

Cost Retail
Inventory, January 1 P 820,000 P 1,262,800
Net purchases 2,280,000 3,607,200
Net mark-ups 450,000
Net markdowns 320,000
Sales 4,350,000
Sales returns 300,000
Employee discount 100,000
Sales discount 80,000
Normal shrinkage 50,000

What is the estimated cost of June 30, 2021 inventory using the average approach?
a) P466,000 c) P616,000
b) P496,000 d) P800,000
Problem 3-14
Thompson Corporation uses the FIFO retail method of inventory valuation. Following are the
information available:

Cost Retail
Beginning Inventory P 240,000 P 600,000
Purchases 1,200,000 2,200,000
Net mark-ups 200,000
Net markdowns 400,000
Sales revenue 1,800,000

If the lower of cost or market rule is disregarded, what would be the estimated cost of ending
inventory?
a) P1,100,000 c) P1,280,000
b) P1,232,000 d) P1,320,000

Problem 3-15
Leonard Company acquired forest assets for a lump sum amount of P20,000,000 which is equal to
the lump sum value of the group of assets. At the time of purchase the company is unable to
determine the fair value of the trees separately since no active market was clearly available. The
other assets in the group had a determinable fair value. The forest assets are listed below and their
related fair value less point of sell costs:

Land under trees 2,000,000

Roads in forest 1,000,000

What amount should the biological asset be initially recorded?

a) P1,000,000 c) P17,000,000
b) P2,000,000 d) P19,000,000

What amount should the non-current non-depreciable asset be initially recorded?

a) P1,000,000 c) P17,000,000
b) P2,000,000 d) P19,000,000

What amount should the non-current depreciable asset be initially recorded?

a) P1,000,000 c) P17,000,000
b) P2,000,000 d) P19,000,000
Problem 3-16
Tatum Corporation reported the following lists of biological assets and agricultural produce for
the year ended December 31, 2021:

Assets Fair value

Diary cattle P3,000,000
Beef cattle 5,000,000
Sheep 2,000,000
Calves on diary cattle 1,000,000
Calves on beef cattle 1,500,000
Lambs 800,000
Milk on diary cattle 500,000
Carcass on beef cattle 600,000
Wool 400,000

What amount of biological asset should Tatum Company report in its December 31, 2021
statement of financial position?
a) P8,000,000 c) P13,300,000
b) P10,000,000 d) P14,800,000

What amount should Tatum Company report as inventory related to the above biological assets?
a) P500,000 c) P1,100,000
b) P600,000 d) P1,500,000