INVENTORIES
Quiz 1
1. KHUBID-20 Company included the following items under inventories:
Materials P 1,400,000
Advance for materials ordered 200,000
Goods in process 650,000
Unexpired insurance on inventories 60,000
Advertising catalogs and shipping boxes 150,000
Finished goods in factory 2,000,000
Finished goods in company-owned retails store, including
50% profit on cost 750,000
Finished goods in hands on consignees including 40% 400,000
profit on sales
Finished goods in transit to customers, shipped FOB
destination, at cost 250,000
Finished goods out on approval, at cost 100,000
Unsalable finished goods, at cost 50,000
Office supplies 40,000
Materials in transit shipped FOB shipping point, excluding
freight of P30,000 330,000
Goods held on consignment, at sales price, cost P150,000 200,000
How much is the correct amount of inventories?
a. P5,610,000 c. P5,375,000
b. P5,500,000 d. P5,450,000
2. The EASY Q Manufacturing Company reviewed its year-end inventory and
found the following items:
(a) A packing case containing a product costing P100,000 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 customer’s order was dated December
18, but the case was shipped and the costumer billed on January 10,
2021.
(b) Merchandise costing P600,000 was received on December 28, 2020,
and the invoice was recorded. The invoice was in the hands of the
purchasing agent; it was marked “On consignment”.
(c) Merchandise received on January 6, 2021, costing P700,000 was
entered in purchase register on January 7. The invoice showed
shipment was made FOB shipping point on December 31, 2020.
Because it was not on hand during the inventory count, it was not
included.
(d) A special machine costing P200,000, fabricated to order for a
particular customer, was finished in the shipping room on December
30. The customer was billed for P300,000 on that date and the
machine was excluded from inventory although it was shipped
January 4, 2021.
(e) Merchandise costing P200,000 was received on January 6, 2021,
and the related purchase invoice was recorded January 5. The
invoice showed the shipment was made on December 29,2020, FOB
destination.
(f) Merchandise costing P150,000 was sold on an installment basis on
December 15. The customer took possession of the goods on that
date. The merchandise was included in inventory because Abulug
still holds legal title. Historical experience suggests that full payment
on installment sale is received approximately 99% of the time.
(g) Goods costing P500,000 were sold and delivered on December 20.
The goods were included in the inventory because the sale was
accompanied by a purchase agreement requiring Abulug to buy back
the inventory in February 2021.
How much of these items should be included in the inventory balance at
December 31, 2020?
a. P1,300,000 c. P1,650,000
b. P 800,000 d. P1,050,000
3. The JCQ Company counted its ending inventory on December 31. None
of the following items were included when the total amount of the
company’s ending inventory was computed:
P150,000 in goods located in JCQ’s warehouse that are on
consignment from another company.
P200,000 in goods that were sold by JCQ and shipped on December
30 and were in transit on December 31; the goods were received by
the customer on January 2. Terms were FOB Destination.
P300,000 in goods were purchased by JCQ and shipped on December
30 and were in transit on December 31; the goods were received by
JCQ on January 2. Terms were FOB shipping point.
P400,000 in goods were sold by JCQ and shipped on December 30
and were in transit on December 31; the goods were received by the
customer on January 2. Terms were FOB shipping point.
The company’s reported inventory (before any corrections) was
P2,000,000. What is the correct amount of the company’s inventory on
December 31?
a. P2,550,000 c. P2,500,000
b. P1,950,000 d. P2,700,000
4. PANGGIMIKi Company included the following items in its inventory on
December 31, 2020:
Merchandise out on consignment, at sales price,
including 25% markup on cost P4,000,000
Goods purchased in transit, FOB destination 2,000,000
Goods held on consignment by PANGGIMIKi Company
1,000,000
By what amount should the inventory at December 31, 2020 be reduced?
a. P3,800,000 c. P1,800,000
b. P2,000,000 d. P1,000,000
5. PHI-UI Company had the following consignment transactions during 2020:
Inventory shipped on consignment to Benguet Company, P600,000
consignee
Freight paid by PHI-UI 50,000
Inventory received on consignment from Ifugao, consignor 800,000
Freight paid by Ifugao 50,000
No sales of consigned goods were made through December 31, 2020. In
its December 31, 2020 balance sheet, PHI-UI should include consigned
inventory of
a. P600,000 c. P 650,000
b. P700,000 d. P1,500,000
6. On June 1, 2020 PHI-UM Company sold merchandise with a list price of
P5,000,000 to ABC. PHI-UM allowed trade discounts of 20% and 10%.
Credit terms were 5/10, n/30 and the sale was made FOB shipping point.
PHI-UM prepaid P200,000 of delivery cost for ABC as an accommodation.
On June 11, 2020, PHI-UM received from ABC full remittance of
a. P3,420,000 c. P3,600,000
b. P3,620,000 d. P3,800,000
7. SAF Company’s accounts payable balance at December 31, 2020 was
P8,000,000 before considering the following data:
Goods shipped to SAF FOB shipping point on December 15, 2020
were lost in transit. The invoice cost of P500,000 was not recorded by
SAF. On January 15, 2021, SAF filed a P500,000 claim against the
common carrier.
On December 30, 2020, a vendor authorized SAF to return for full
credit goods shipped and billed at P200,000 on December 15, 2020.
The returned goods were shipped by SAF on December 31, 2020. A
P200,000 credit memo was received and recorded on January 5, 2021.
What should SAF report as accounts payable on December 31, 2020?
a. P8,300,000 c. P7,800,000
b. P8,500,000 d. P7,500,000
8. FUN DAYMIC Company began operations late in 2019. For the first
quarter ended March 31, 2020, FUN DAYMIC made available the following
information:
Total merchandise purchased through March 15, recorded at net
P4,900,000 Merchandise inventory at December 31, 2019, at selling price
1,500,000
All merchandise was acquired on credit and no payments have been made
on accounts payable since the inception of the company. All merchandise
is marked to sell at 50% above invoice cost before time discounts of 2/10,
n/30. No sales were made in 2020.
How much cash is required to eliminate the current balance in accounts
payable?
a. P6,000,000 c. P6,400,000
b. P5,900,000 d. P5,750,000
9. QUART TIN Company has determined its December 31, 2020 inventory
on a FIFO basis at P9,500,000. Information pertaining to that inventory
follows:
Estimated selling price P14,000,000
Estimated cost to complete and cost of disposal 5,000,000
Normal profit margin 2,000,000
Current replacement cost 8,000,000
QUART TIN records losses that result from applying the lower of cost or
market rule. At December 31, 2020, QUART TIN should report inventory
at
a. P9,500,000 c. P9,000,000
b. P8,000,000 d. P7,000,000
10. AYUHDA Company installs replacement siding, windows, and louvered
glass doors for family homes. At December 31, 2020, the balance of raw
materials inventory account was P502,000, and the allowance for
inventory writedown was P33,000. The inventory cost and market data at
December 31, 2020, are as follows:
Cost Replacement Sales Net Normal
Cost Price Realizable Profit
value
Aluminum siding
89,000 86,000 91,500 87,000 5,000
Mahogany siding 94,000 92,000 93,000 85,000 7,000
Louvered glass
door 125,000 135,000 129,000 111,000 10,000
Glass windows 194,000 114,000 205,000 197,000 20,000
Total 502,000 427,000 518,500 480,000 32,000
The correct balance of the raw materials inventory after any allowance for
write down is
a. P427,000 c. P480,000
b. P486,500 d. P477,000
