QUIZZER 10-INVENTORIES

1. The physical count conducted in the warehouse of Rev Company on December 31, 2016
revealed merchandise with a total cost of P2,500,000. However, further investigation revealed
that the following items were excluded from the count.
 Goods sold to a customer, which are being held for the customer to call at the
customer's convenience with a cost of P150,000.
 A packaging case containing a product costing P300,000 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". The investigation revealed that
the customer's order was dated December 28, 2016, but then the case was shipped and
the customer billed on January 4, 2017.
 A special machine costing P180,000, fabricated to order for a customer, was finished
and specially segregated on December 31, 2016. The customer was billed on that date
and the machine was excluded from inventory although it was shipped on January 2,
2017.

The correct amount of inventory be reported on December 31, 2016 is

a. 2,650,000 b. 2,800,000 c. 2,950,000 d. 3,130,000

2. The cost of inventories should comprise all costs of purchase, cost of conversion and other costs
incurred in bringing the inventories to their present location and condition. The following items
are considered as costs of purchase of inventories except

a. Purchase price, net of trade discounts and volume rebates

b. Transportation costs, insurance and handling costs
c. Import duties and other taxes (other than those subsequently recoverable by the
enterprise from the taxing authorities
d. Costs directly related to the units of production, such as direct labor

3. Lunar Company included the following items under inventory:

Material P 100,000
Advance for materials ordered 150,000
Goods in process 350,000
Unexpired insurance on inventory 20,000
Advertising catalogs and shipping cartons 70,000
Finished goods in factory 400,000
Finished goods in entity-owned retail store, including
50% profit on cost. 375,000

The correct amount of inventory to be reported is

a. 1,037,500 b. 1,100,000 c. 1,225,000 d.1,250,000

4. Solar Company included the following items under inventory:

Finished goods in hands of consignees, including 40℅

Profit on sales 250,000
Finished goods in transit to customers, shipped FFO
destination at cost 100,000
Unsalable finished goods, at cost 50,000
Office supplies 10,000
Materials in transit, shipped FOB-shipping point,
excluding freight of P40,000 160,000
Goods held on consignment, at sales price, cost 220,000
 P150,000

The correct amount of inventory to be reported is

a. 350,000 b.410,000 c.450,000 d.600,000

5. Dalton Distribution, Inc. reported inventory of P1,300,000 per physical count of all the goods
hand at December 31, 2016. Upon an examination of the records and documents you find the
following transactions:
 Goods received on January 4, 2017 costing P60,000 were recorded on January 5,2017.
The invoice showed shipment was made FOB supplier's warehouse on December 31,
2016.
 Goods costing P40,000 were received on December 28, 2016 and the invoice was not
recorded. The accompanying document was marked "on consignment”.
 Goods costing P110,000 were received on January 2, 2017 and the related invoice
recorded on that date. The invoice showed the shipment was made on December 29,
2016, FOB destination.

The correct inventory at December 31, 2016 is

a. 1,260,000 b.1,320,000 c.1,360,000 d.1,430,000

6. The Fuji Co. produces a single product. Cost accumulated at the end of the period are as follows:

Raw material purchases P 54,000

Depreciation on manufacturing equipment 3,000
Sales commissions 20,000
Factory labor 36,000
Property tax on manufacturing equipment 3,500
Production supervisor's salary 20,000
Shipping costs on units sold 43,500
Materials used in production 81,500
Cost of goods manufactured 130,000
Costs of units sold 140,000

Inventories at the beginning of the period: Raw materials, P67,000; Work in progress, none;
Finished goods, P22.500.

The work in progress inventory at the end of the period is:

a. 10,500 b.11,000 c.12,500 d.14,000

7. Bar Company purchases motorcycles from various countries and exports them to Europe. Bar
Company has incurred the following costs during the current year:

Cost of purchases based on vendor's invoices 2,000,000

Trade discounts on purchases already deducted from vendors’
invoices 200,000
Import duties 150,000
Freight and insurance on purchases 60,000
Other handling costs relating to imports 40,000
Salaries of accounting department 100,000
Brokerage commission paid to agents for arranging imports 50,000
Sales commission paid to sales agents 80,000
After-sales warranty costs 20,000

The total cost of the purchases is

a. 2,100,000 b.2,300,000 c.2,380,000 d.2,400,000

 8. On May 1, 2016 West Company made two purchases with a list price of P370,000 and P420,000,
both subject to trade discounts of 20% and 10%. Credit terms were 2/15, n/30. The payment
due on P420,000 was remitted on May 14, 2016 while the payment due on P370,000 was
remitted on May 25, 2016.

The net purchases to be included in the determination of cost of goods sold for the month of May
should be:

Net method Gross method Net method Gross method

a. P 563,472 P 568,800 c. P 547,820 P 549,940

b. P 557,424 P 562,752 d. P 541,940 P 547,120

9. Macy Corporation had the following transactions near the end of 2016:

Transaction Terms Shipment Date received Invoice

F. O. B Date price
Purchase Shipping point 12/26/16 01/07/17 150,000
Purchase Destination 12/26/16 12/29/16 230,000
Sale Shipping point 12/28/16 01/07/17 475,000
Sale Destination 12/29/16 01/06/17 110,000

Amount included in the inventory of Macy at December 31, 2016 is

a. 260,000 b.380,000 c.490,000 d.625,000

Use the following information for numbers 10-11

Jay Corporation uses a periodic inventory system and a fiscal year ending September 30. On
September 30, 2015, Jay Company correctly reported inventory on hand costing P900,000.
During the fiscal year ending September 30, 2016, Jay Company recorded purchases of
P5,700,000. A physical count on September 30, 2016 revealed that goods costing P1,250,000
were on hand. The following material events occurred between September 25 and October 7,
2016:

 An invoice for goods costing P260,000 was received and recorded on September 29. The goods
arrived on October 2. The supplier shipped the goods FOB destination on September 27.
 Invoice for goods costing P180,000 was received and recorded on September 28. The supplier
shipped the goods FOB shipping point on September 26. The receiving report indicates that Jay
Company received the goods on October 1.

10. The correct amount purchases to be reported in Jay Company's income statement for the fiscal
year ending September 30, 2016 should be
a. 5,440,000 b. 5,520,000 c. 5,700,000 d. 5,960,000

11. The inventory amount to be reported in Jay Company's balance sheet at September 30, 2016
should be
a. 1,250,000 b.1,430,000 c. 1,510,000 d. 1,690,000

12. Cost of goods sold is equal to

a. The cost of inventory at the end of a period plus net purchases minus the cost of inventory
at the beginning of a period.
b. The cost of inventory at the beginning of a period minus net purchases plus the cost of
inventory at the end of the period.
c. The cost of inventory at the beginning of a period plus net sales minus the cost of inventory
at the end of period.
 d. The cost of inventory at the beginning of a period plus net purchases minus the cost of
inventory at the end of a period.
13. An entity is a large manufacturer of machines. A major customer has placed an order for a
special machine for which it has given a deposit to the entity. The parties have agreed on a price
for the machine. As per terns of the sale agreement, it is FOB or free on board contract and the
title passes to the buyer when goods are loaded into the ship at the port. When should the
revenue be recognized by the entity?
a. When the customer orders the machine.
b. When the deposit is received.
c. When the machine is loaded at the port.
d. When the machine has been received by the customer.

14. Goods on consignment should be included in the inventory of

a. The consignor but not the consignee
b. The consignee but not the consignor
c. Both the consignor and consignee
d. Neither the consignor nor the consignee

15. The inventory cost of a service provider shall exclude

a. Labor and other cost of personnel directly engaged in providing the service.
b. Compensation of supervisor directly engaged in providing the service.
c. Attribution overhead incurred in providing the service.
d. Profit margin factored into the price charge against the customer by the service provider.
 QUIZZER 11-INVENTORIES

1. Sun Valley Company bought a 10-hectare land in Paranaque to be improved, subdivided into lots
and eventually sold. Purchase price of the land was P5,800,000. Taxes and documentation
expenses on the transfer to the property amounted to P80,000. The lots were classified as
follows.

Lot Class Number of lots Selling price per lot Total clearing cost
AZ 10 100,000 None
BY 20 80,000 100,000
CX 40 70,000 300,000
DW 50 60,000 800,000

The amount allocated as total cost of Class BY lot is

a. 1,176,000 b. 1,220,000 c. 1,276,000 d. 1,700,000

Use the following information for numbers 2-4

Berry Farm Corporation sells honey. At the end of 2015, there were 2,000 jars of honey on hand
costing P25 per jar. The following information is available from the company's inventory records
for the first quarter of 2016:

Date Jars Purchased Cost per jar Jars sold Selling price per jar
Jan 16 9,000 P26.50
Jan 28 5,000 P 52
Feb 25 11,000 28.00
Mar 19 10,000 55

2. If FIFO costing method is used, the inventory cost at the end of the quarter is
a. 175,000 b. 182,500 c.185,500 d. 196,000

3. If moving average costing method is used, the unit cost of the inventory at the end of the
quarter is
a. 27.60 b.27.37 c.27.11 d. 26.23

4. If weighted average (periodic) costing method is used, cost of sales for the first quarter is
a. 397,500 b.400,500 c.406,650 d.414,000

Use the following information for numbers 5-6

During January 2016 Quick Co. which maintains a perpetual inventory system, recorded the
following information pertaining to its inventory:
Unit Units
Units Cost on hand
Balance on 1/1/2016 1,000 P 10 1,000
Purchased on 1/7/2016 600 30 1,600
Sold on 1/20/2016 900 700
Purchased on 1/25/2016 400 50 1,100

5. Under moving average, the cost of sales for January is

a. 9,000 b. 15,750 c. 21,600 d. 35,000
6. Under FIFO, the inventory balance on January 31 is
a. 39,000 b.27,000 c. 26,400 d. 13,0

7. Under the weighted average cost formula, the cost of each item is determined from
I. Weighted average of the cost of similar items at the beginning of a period and the cost of
similar item at the end of the period.
II. Weighted average of the cost of similar items at the beginning of a period and the cost of
similar items at the purchased or produced during the period.

a. I only b II only c. Either I or II d. Neither I or II

8. The use of a Purchase Discounts account implies that the recorded cost of a purchased
inventory item is its
a. Invoice price
b. Invoice price plus any purchase discount lost
c. Invoice price less the purchase discount taken
d. Invoice price less the purchase discount whether taken or not

9. A large manufacturer sells merchandise to a retailer, which in turn sells goods to the public
through its chain of retail outlets. The retailer purchases merchandise from the manufacturer
under a consignment contract. When should revenue be recognized by the manufacturer?
a. When goods are delivered to the retailer.
b. When goods are old by the retailer.
c. It will depend on the terms of delivery of the merchandise.
d. It will depend on the terms of payment.

10. ABC Company provided the following net income and inventory:

2015 2016
Net income using LIFO 2,750,000 3,000,000
Year-end inventory – LIFO 1,400,000 2,000,000
Year-end inventory – FIFO 900,000 1,600,000

The net income for 2016 using the FIFO cost flow is
a. 2,600,000 b.2,900,00 c.3,100,000 d.3,500,000

11. On December 30, 2016, West Company shipped to a customer merchandise with selling price of
P75,000, terms /30, FOB shipping point. Selling price is 125% of cost was recorded in January
2017 when the check was received. Ending inventory was determined by physical count on
December 31, 2016.

West Company's cost of goods sold for 2016 was:

a. Understated by P6,000 c. Overstated by P 75,000

b. Overstated by P 60,000 d. Correctly stated

12. What is the method of accounting for inventory in which the cost of goods sold is recorded each
time a sale is made?
a. Professional inventory system c. Periodic inventory system
b. Perpetual inventory system d. Planned inventory system
 QUIZZER 12-INVENTORIES

1. On April 30, 2016, a fire damaged the office of WOW Company. The following were gathered
from the general ledger on March 31, 2016:

Accounts receivable 960,000 Sales 3,600,000

Inventory-January 1 1,880,000 Purchase 1,680,000
Accounts payable 950,000

Additional information:

 An examination of the April bank statement and canceled checks revealed checks written during
the period April 1-30 as follows
Accounts payable 240,000
April merchandise shipments 80,000
Expenses 160,000
Deposits during the same period amounted to P440,000 consisting of collections from
customers with the exception of P20,000 refund from vendor for merchandise returned in April.
 Customers acknowledged indebtedness of P1,040,000 at April 30. Customers owed another
P60,000 that will never be recovered. Of the acknowledged indebtedness, P40,000 may prove
uncollectible.
 Correspondence with suppliers revealed unrecorded obligations at April 30, of P340,000 for
April merchandise shipment, including P100,000 for shipments in transit on that date.
 The average gross profit rate is 40%.
 Inventory with a cost of P260,000 was salvaged and sold for P140,000. The balance of the
inventory was a total loss.

The fire loss April 30 is

a. 1,200,000 b. 1,300,000 c. 1,340,000 d. 1,440,000

2. The gross margin method of estimating ending inventory may be used for all of the following,
except
a. Internal as well as external interim reports
b. Internal as well as external year-end reports
c. Estimate of inventory destroyed by fire or other casualty
d. Rough test of the validity of as inventory cost determined under either periodic or perpetual
system.

3. On September 30, 2017, a fire at Milan Company's only warehouse caused severe damage to its
entire inventory. Based on recent history, Milan has a gross profit of 30% of net sales. The
following information is available from Milan’s records for nine months. The following
information is available from Milan's records for the nine months ended September 30, 2017:

Inventory at January 1, 2017 P550,000

Total purchases received and recorded from January to date of fire 3,000,000
Total freight cost of goods purchased and received 60,000
Total credit memo received on goods purchased and received 200,000
 Total discounts taken on purchases 80,000
Invoice received for goods purchased but still in transit shipped on
September 30, 2017, FOB shipping point 120,000
Total sales delivered and recorded from Jan to date of fire 3,600,000
Unrecorded sales invoice for goods delivered 300,000
Total sales returns accounted and recorded to date of fire 160,000
Total sales discounts taken by customers on recorded sales 40,000
A physical inventory disclosed usable damaged goods which Milan estimates can be sold to a
jobber for P 50,000

Using the gross profit method, how much would be the inventory loss?
a. 602,000 b. 662,000 c. 782.000 d. 832,000

4. The following information pertains to Champs' inventory for January 2016:

Cost Retail
Inventory, January 1 P355,000 P500,000
Purchases 1,124,000 2,012,500
Purchase returns 69,000 112,500
Freight in 110,000
Net mark-ups 100,000
Net markdowns 125,000
Sales 2,100,000
Sales returns 50,000
Employee discounts grant 25,000
Normal breakage 50,000

The estimated cost of inventory on January 31, 2016 using average retail is
a. P144,000 b. P152,500 c. P160,000 d. P176,000

5. Thrift Department Store is currently preparing its interim financial statements and would like to
know an estimate of its ending inventory. You are provided the following data for the third
quarter of 2016: sales, P14,610,000; transportation-in, P350,000; inventory July 1, P2,800,000;
purchase returns, P140,000; transportation-out, P850,000; purchases, P6,790,000; sales returns,
P700,000.
The average rate of gross margin on sales during the last three years is 40%.
The estimated cost of the inventory at September 30, 2016 is
a. P1,034,000 b. P1,454,000 c. 1,534,000 d. P1,954,000

6. On January 20, 2016, the records of Stag Co. revealed the following information:

Inventory, Jan 1, 2016 P51,600

Purchase discounts taken 5,800
Purchases, Jan 1, to Jan 20 368,000
Freight-in 3,800
Sales, Jan 1, 2016 to Jan 20 583,000
Sales returns 8,600
Purchase returns 11,200

A fire destroyed the entire inventory on January 20, 2016 except for purchases in transit, FOB
shipping point, of P2,000 and goods having a selling price of P4,700 that were salvaged from the
fire. The salvaged goods had an estimated salvage value of P2,900 The average gross profit on
net sales in previous periods had been 40%.

The estimated cost of inventory lost in the fire is

a. P55,060 b. P56,940 c. P68,140 d. P 54,040
7. NY Company has two products having costs and selling prices as follows:

Burgers Franks
Selling Price 2,000,000 3,000,000
Materials and conversion cost 1,500,000 1,800,000
General administration costs 300,000 800,000
Estimated selling costs 600,000 700,000

What is the measurement of Burgers and Franks, respectively?

a. 1,400,000 and 2,300,000 c. 1,400,000 and 1,800,000
b. 1,500,000 and 2,300,000 d. 1,500,000 and 1,800,000

8. Inventories shall be measured at

a. Cost b. Lower of cost and net realizable value
c. Net realizable value d. higher of cost and net realizable value

9. Yum Company uses the lower of cost or net realizable value method to value inventory. Data
regarding the items in work in process inventory are presented below.

Tarts Pies Mallows

Historical cost 240,000 188,000 300,000

Selling price 360,000 250,000 360,000
Estimated cost to complete 48,000 50,000 68,000
Replacement cost 208,000 168,000 318,000
Normal profit as a percentage of selling price 25% 25% 25%

What is the measurement of the work in process inventory?

a. 676,000 b. 694,000 c. 720,000 d. 728,000

10. Net realizable value is

a. Current replacement cost
b. Estimated selling price
c. Estimated selling price less estimated cost to complete
d. Estimated selling price less estimated cost to complete and cost to sell

11. On January 1, 2016 Card Company signed a three-year, noncancelable purchase contract, which
allows Card to purchase company up to 5,000 units of a computer part annually from Hart
company at P100 per unit and guarantees a minimum annual purchase of P1,000 units

During 2016, the part unexpectedly became obsolete Card has 2.500 units of this inventory on
December inventory on December 31, 2016, and believes these parts can be sold as scrap for
P20 per unit.

The probable loss from the purchase commitment to be reported the 2016 income statement is
a. 160,000 b. 200,000 c.240.000 d. 360,000

12. If the average retail inventory method a used, which of the following calculations would include
or exclude net markdown?
Cost ratio Ending inventory at retail
 a. Include Include
b. Include Exclude
c. Exclude Include
d. Exclude Exclude