1. A VAT-registered entity purchases inventory. The invoice price of the inventory includes “Hold for shipping instructions.

for shipping instructions.” The sale order was dated December 17, 20x1 but the package
payment for VAT. The entity should was shipped and the customer was billed on January 4, 20x2.
a. include the VAT paid as part of the cost of the inventory. c. Merchandise costing ₱10,000, shipped FOB destination from a vendor on December 30, 20x1, was
b. exclude the VAT paid and record it under the VAT payable account. received and recorded on January 5, 20x2.
c. exclude the VAT paid and record it under the Input VAT account. d. Goods shipped F.O.B. shipping point on December 27, 20x1, from a vendor to ABC Co. were
d. ignore the VAT payment and disclose it only in the notes to the financial statements. received on January 6, 20x2. The invoice cost of ₱30,000 was recorded on December 31, 20x1 and
included in the count as “goods in-transit.”
Use the following information for the next two questions:
During 2004, Elway Corporation transferred inventory to Howell Corporation and agreed to 6. How much is the adjusted balance of inventory?
repurchase the merchandise early in 2005. Howell then used the inventory as collateral to borrow a. 240,000 b. 230,000 c. 160,000 d. 200,000
from Norwalk Bank, remitting the proceeds to Elway. In 2005 when Elway repurchased the inventory,
Howell used the proceeds to repay its bank loan. 7. How much is the adjusted balance of accounts payable?
a. 90,000 b. 80,000 c. 60,000 d. 100,000
2. This transaction is known as a(n)
a. consignment. 8. The records of ABC Co. show the following:
b. installment sale. a. Goods sold on an installment basis to XYZ, Inc., title to the goods was
c. assignment for the benefit of creditors. retained by ABC Co. until full payment is made. XYZ, Inc. took possession
d. product financing arrangement. 150,000
of the goods.
b. Goods sold to Alpha Co., for which ABC Co. has the option to repurchase
3. On whose books should the cost of the inventory appear at the December 31, 2004 balance sheet the goods sold at a set price that covers all costs related to the inventory. 280,000
date? c. Goods sold under a “sale on trial” arrangement 70,000
a. Elway Corporation d. Goods received from Beta Co. for which an agreement was signed requiring
b. Howell Corporation ABC Co. to replace such goods in the near future. 50,000
c. Norwalk Bank
d. Howell Corporation, with Elway making appropriate note disclosure of the transaction How much is included as part of inventory?
a. 50,000 b. 120,000 c. 270,000 d. 330,000
4. Eller Co. received merchandise on consignment. As of January 31, Eller included the goods in
physical inventory but did not record the transaction. The effect of this on its financial statements 9. ABC Co. uses the periodic inventory system. In the current year, ABC’s ending inventory is
for January 31 would be understated by ₱20,000. Which of the following statements is correct?
a. net income or profit, current assets, and retained earnings were overstated. a. ABC’s cost of goods sold is understated by ₱20,000.
b. net income or profit was correct and current assets were understated. b. ABC’s gross income is understated by ₱20,000.
c. net income or profit and current assets were overstated and current liabilities were c. ABC’s net purchases are understated by ₱20,000.
understated. d. ABC’s profit is overstated by ₱20,000.
d. net income or profit, current assets, and retained earnings were understated.
10. On January 1, 20x1 Plaka Co. acquired goods for sale in the ordinary course of business for
5. Dawn Co. purchased goods with invoice price of ₱3,000 on account on December 27, 20x1. The ₱250,000, excluding ₱5,000 refundable purchase taxes. The supplier usually sells goods on 30
related shipping costs amounted to ₱50. The seller shipped the goods on December 31, 20x1. days’ interest-free credit. However, as a special promotion, the purchase agreement for these
Dawn Co. received the goods on January 2, 20x2 and settled the account on January 5, 20x2. How goods provided for payment to be made in full on December 31, 20x1. Transport charges of
much is the net cash payment to the supplier if the terms of the shipment are FOB destination, ₱2,000 were paid on January 1, 20x1. An appropriate discount rate is 10 per cent per year. How
freight collect? much is the initial cost of the inventories?
a. 3,050 b. 3,000 c. 2,950 d. 0 a. 229,273 b. 224,727 c. 250,000 d. 257,000

Use the following information for the next two questions: 11. Ciano Co. acquired a tract of land for ₱2,000,000. The land was developed and subdivided into
On December 31, 20x1, ABC Co. has a balance of ₱240,000 in its inventory account, determined residential lots at an additional cost of ₱200,000. Although the subdivided lots are relatively equal
through physical count, and a balance of ₱90,000 in its accounts payable account. The balances were in sizes, they were offered at different sales prices due to differences in terrain. Information on
determined before any necessary adjustment for the following: the subdivided lots is shown below:
a. Segregated goods in the shipping area marked “Bill and hold sale” were included in inventory
because shipment was not made until January 4, 20x2. The goods were sold to the customer, on a
“bill and hold” sale, for ₱20,000 on December 30, 20x1. The customer accepted the billing on that
day. The cost of the goods is ₱10,000. The goods were already packed and ready for shipment.
Both ABC and the buyer acknowledged the shipping term.
b. A package containing a product costing ₱80,000 was standing in the shipping area when the
physical inventory was conducted. This was included in the inventory although it was marked
Lot group No. of lots Price per lot
A 4 480,000
B 10 240,000
C 15 192,000
During the year, 2 lots from the A group, 3 lots from the B group and 12 lots from the C group were d. 123,384 218,824
sold. How much gross income is recognized during the year?
a. 2,766,666 b. 2,783,333 c. 2,860,000 d. 2,877,333 16. Vacation Co. buys and sells products A & B. The following unit costs are available for the
inventory as of December 31, 20x1: (All costs are borne by Vacation Co.)
Use the following information for the next four questions: A B
Kryslanz Co. is a wholesaler of guitar picks. The activity for product “Pick X” during August is shown Number of units 2,000 3,000
below: Purchase cost per unit ₱125 ₱190
Delivery cost from supplier 10 30
Date Transaction Units Unit cost Total cost Estimated selling price 150 250
Selling costs 22 28
1-Aug Inventory 2,000 ₱ 28.80 ₱ 57,600
General and administrative 15 18
7 Purchase 3,000 29.76 89,280
12 Sales 4,200 How much total inventory shall be reported in Vacation Co.’s 20x1 financial statements?
13 Purchase 4,800 30.40 145,920 a. 916,000 b. 930,000 c. 936,000 d. 696,000
14 Sales return 600
17. On January 1, 20x1, Shock Co. signed a three year, noncancelable purchase contract that allows
22 Sales 3,800
Shock Co. to purchase up to 12,000 units of a microchip annually from Aha! Co. at ₱15 per unit.
29 Purchase 1,900 30.88 58,672 The guaranteed minimum annual purchase is 3,000 units. At year-end, it was found out that the
30 Purchase return 300 30.88 (9,264) goods are obsolete. Shock Co. had 4,000 units of this inventory at December 31, 20x1, and believes
these parts can be sold as scrap for ₱5 per unit. How much is the loss on purchase commitment to
Total goods available for sale ₱ 342,208 be recognized on December 31, 20x1?
a. 70,000 b. 100,000 c. 60,000 d. 0

12. How much are the ending inventory and cost of goods sold under the FIFO – periodic cost flow 18. The raw materials inventory of Mug Co. on December 31, 20x1 have a cost of ₱20,000 and an
formula? estimated net realizable value of ₱18,000. Information on the finished goods is as follows:
Ending inventory Cost of goods sold Cost............................................................₱250,000
a. 219,840 122,368 NRV............................................................₱280,000
b. 112,341 229,867
c. 122,368 219,840 How much is the total inventory on December 31, 20x1?
d. 122,386 219,804 a. 268,000 b. 270,000 c. 298,000 d. 300,000

13. How much are the ending inventory and cost of goods sold under the FIFO – perpetual cost flow Use the following information for the next two questions:
formula? Almost Co. has the following comparative information regarding its inventories.
Ending inventory Cost of goods sold 20x2 20x1
a. 219,840 122,368 Inventory, December 31 at cost 30,000 24,000
b. 112,341 229,867 Inventory, December 31 at NRV 33,000 22,000
c. 122,368 219,840 Cost of goods sold before adjustments 180,000 200,000
d. 122,386 219,804
Almost Co. recognizes write-downs of inventories in cost of goods sold.
14. How much are the ending inventory and cost of goods sold under the weighted average –
periodic cost flow formula? 19. How much is the cost of goods sold in 20x1?
Ending inventory Cost of goods sold a. 200,000 b. 202,000 c. 198,000 d. 220,000
a. 229,840 112,160
b. 126,468 215,740 20. How much is the cost of goods sold in 20x2?
c. 120,080 222,128 a. 178,000 b. 177,000 c. 182,000 d. 183,000
d. 120,072 222,153

15. How much are the ending inventory and cost of goods sold under the weighted average –
perpetual cost flow formula?
Ending inventory Cost of goods sold
a. 121,794 220,414
b. 122,468 219,740
c. 122,017 220,191