Chapter - Inventories CHAPTER INVENTORIES PROBLEMS 4-1 4-2 4.3 (Crossings Company) Invoice price (150,000 x 0.80) Freight charge Total cost of merchandise purchase (Orient Trading) Reported inventory Goods held on consignment Mark up on goods out on consignment Sales price Cost (600,000÷ 1.5) Correct inventory P 120,000 2,500 P 122,500 P 9,500,000 ( 500,000) 600,000 400,000 (Tintin Company) Physical inventory at December 31, 2009 Merchandise in transit shipped FOB shipping point Merchandise sold FOB destination still in transit Correct inventory at December 31, 2009 ( 200,000) P 8,800,000 P 172,000 31,500 12,500 P 216,000 4-4 (Jane, Inc.) Reported units on April 30, 2009 10,200 Adjustments: No item – Purchased FOB destination still in transit but included in purchases ( 300) No item – Sold FOB destination still in transit but taken as sale and excluded in inventory 500 Correct inventory quantity 10,400 4.5 (Centerpoint, Inc.) Reported inventory Adjustments: a Goods out on consignment b Goods purchased in transit FOB shipping point c Goods sold in transit FOB shipping point included in inventory d Goods sold in transit FOB destination not included in inventory g Goods sold in transit FOB destination not included in inventory Correct inventory 4.6 (Mega Company) Cost of Ending 23 P 562,500 110,000 27,000 ( 85,000) 26,000 P 677,500 37,000 Chapter - Inventories Inventory FIFO Weighted average Moving average Gross Profit 3,561.25 3,388.55 Cost of Goods Sold 4,495.00 4,667.70 3,426.45 4,629.80 1,795.20 1,930.00 1,757.30 FIFO Cost of ending inventory: 275 x 11.75 3,231.25 30 x 11.00 330.00 3,561.25 Cost of goods sold: Cost of goods available for sale 8,056.25 Less ending inventory 3,561.25 Gross profit: Sales 6,425.00 Less cost of goods sold 4,495.00 4,495.00 1,930.00 Weighted average Cost of ending inventory: Cost of goods available for sale 8,056.25 Number of units available for sale 725 Weighted average cost per unit 11.11 Units in ending inventory 305 ÷ x Cost of goods sold: Cost of goods available for sale 8,056.25 Less ending inventory 3,388.55 Gross profit: Sales Less cost of goods sold 4,667.70 3,388.55 4,667.70 6,425.00 1,757.30 Moving average Cost of ending inventory: Inventory, January 250 x 10.50 = 2,625.00 Purchase, March 200 x 11.00 = 2,200.00 Total 450 x 10.72 = 4,825.00 Sale, May 20 (120 x 10.72 = 1,286.40) Sale, June 30 ( 55 x 10.72 = 589.60) Balance 275 x 10.72 = 2,949.00 Purchase, July 15 275 x 11.75 = 3,231.25 24 Chapter - Inventories Total Sale, September 17 Balance 550 x 11.24 = 6,180.25 (245 x 11.24 = 2,753.80) 305 x 11.24 = Cost of goods sold: Cost of goods available for sale 8,056.25 Less ending inventory 3,426.45 4.7 8,100 Gross profit: Sales Less cost of goods sold 4,629.80 (Landmark Enterprises) a Cost of ending inventory 1/1 2,400 @ 10.75 1/5 1,900 @ 11.35 4,300 @ 11.02 1/8 2,200 @ 11.02 2,100 @ 11.01 1/24 3,800 @ 11.80 5,900 @ 11.52 1/30 3,600 @ 11.52 2,300 @ 11.52 4,629.80 6,425.00 1,795.20 25,800 21,565 47,365 24,244 23,121 44,840 67,961 41,472 26,489 b Cost of goods available for sale (25,800 + 21,565 + 44,840) P92,205 Number of units available for sale (2,400 + 1,900 + 3,800) 11,38 2,300 ÷ Weighted average cost per unit P Number of units in ending inventory x Cost of ending inventory 4-8 3,426.45 P26,174 (Chic Department Store) a FIFO cost basis Inventory, June Purchases Available for sale Sales Inventory, June 30 at retail Cost percentage (2,400,000/4,000,000) Estimated cost of inventory Cost P 400,000 2,400,000 P2,800,000 Retail P 750,000 4,000,000 P4,750,000 3,500,000 P1,250,000 60% P 750,000 Cost of goods available for sale P2,800,000 Less estimated cost of ending inventory 750,000 Estimated cost of goods sold P2,050,000 b Average cost basis Inventory, June 30 at retail 25 P1,250,000 Chapter - Inventories Cost percentage (2,800,000/4,750,000) Estimated cost of inventory 58.95% P 736,875 Cost of goods available for sale P2,800,000 Less estimated cost of ending inventory 736,875 Estimated cost of goods sold P2,063,125 4-9 7.25 4.10 (Rockwell Club, Inc.) Amount Cost of sales: Sales (160,500 x 12) 1,926,000 P1,187,400 Less gross profit 738,600 Add ending inventory 42,000 x 7.40 310,800 332,400 3,000 x 7.20 21,600 Available for sale P1,519,800 Deduct purchases 1,150,050 Inventory, January P 369,750 Average cost per unit (369,750 ÷ 51,000 units) (DEC Company) Merchandise inventory, January 1, 2009 450,000 Purchases for the year 3,150,000 Cost of goods available for sale P3,600,000 Less estimated cost of goods sold (4,000,000 x 70%) 2,800,000 Estimated cost of ending inventory Physical inventory on December 31, 2009 Estimated cost of the missing inventory 50,000 Units 160,500 45,000 205,500 154,500 51,000 P P P 800,000 750,000 P 4-11 Estimated cost of goods sold (705,000 – 18,000)/ 1.20 P572,500 Add Inventory at July 20, 2009 205,000 Cost of goods available for sale P777,500 Less net purchases for the period (650,000 – 12,000 + 6,000) 644,000 Estimated cost of June 30, 2009 inventory 4-12 (Manel’s Company) 26 P133,500 Chapter - Inventories Merchandise inventory, January Purchases (1,000,000 + 40,000 – 60,000) Available for sale Estimated cost of goods sold (3,200,000 x 70%) Estimated ending inventory Less goods undamaged located in showroom (200,000 + 80,000) Estimated cost of merchandise destroyed by the flood 4-13 (Old Rose Company) Inventory, January 1, 2009 Purchases Freight in Cost of goods available for sale P1,820,000 Estimated cost of goods sold (2,200,000 – 50,000) x 70% Estimated cost of ending inventory Inventory per actual count Shortage in inventory 155,000 4-14 4.15 (Blazing Red Company) Inventory, January 1, 2009 Purchases: Payments to suppliers Accounts Payable, 8/28/07 Accounts Payable, 1/1/06 Cost of goods available for sale P2,664,240 Estimated cost of goods sold: Collections from customers Accounts Receivable, 8/28/07 Accounts Receivable, 1/1/07 Sales Cost percentage Estimated cost of ending inventory Less undamaged goods: Goods out on consignment Goods in transit Estimated inventory fire loss (London Company Beginning Inventory Purchases Markups Markdowns Total Sales Revenue Ending Inventory, at retail Cost to retail ratio: 160,000 220,000+20,00040,000 Ending Inventory, at estimated cost 27 P2,000,000 980,000 P2,980,000 2,240,000 P 740,000 280,000 P 460,000 P1,000,000 800,000 20,000 1,505,000 P 315,000 160,000 P P 575,400 P1,950,000 491,400 ( 352,560) 2,088,840 P3,015,200 515,560 ( 522,360) P3,008,400 70% 2,105,880 P 558,360 P 195,000 69,500 264,500 P 293,860 Retail P 60,000 220,000 20,000 (40,000) P260,000 (80,000) P80,000 80% P64,000 Chapter - Inventories 4-16 (Alemars Drygoods, Inc.) Retail P1,050,00 735,000 80,000 ( 15,000) (105,000) P1,745,00 (1,050,000 ) P 695,000 665,000 P 30,000 Beginning Inventory Purchases Markups (1,600 x 50) Markup cancellations (300 x 50) Markdowns Total Sales Revenue Ending Inventory, at retail Physical inventory on January 31, 2009 Inventory shortage at retail value 4-17 (Uniwide Sales) Beginning Inventory Purchases Purchase Allowance Freight In Departmental Transfers In Additional Markups Markup Cancellations Markdowns (6,000 – 4,500) Total Sales Inventory Shortage Ending Inventory, at retail Cost to retail ratio (523,380/671,000) Ending Inventory, at estimated cost 4-18 Cost P184,000 339,380 ( 11,000) 9,000 2,000 _ P523,380 Retail P202,000 458,000 3,000 12,000 ( 2,500) (1,500) P671,000 (374,000) ( 7,000) P290,000 78% P226,200 (City Company) Cost (under FIFO basis) P26,000 Net realizable value (40,000 – 12,000) P28,000 Lower of cost and net realizable value P26,000 4-19 (Purple Company) Cost Net realizable value (204,000 – 10,000) 194,000 Loss 4-20 (Powder Blue Company) Inventory, January Purchases during the year Cost of goods available for sale P8,000,000 Less Inventory, December 31 1,200,000 Cost of goods sold 28 P200,000 6,000 P1,400,000 6,600,000 P6,800,000 Chapter - Inventories 4-21 (Rustan’s Trading) Product A B C D Total 4-22 Cost 102 45 24 NRV 105 42 22 10 Lower 102 42 22 Quantity 4,000 6,000 5,500 7,200 Amount P408,000 252,000 121,000 64,800 P845,800 (Sta Lucia Company) Reported net income under average method Difference in inventory using FIFO Beginning inventory Ending inventory 96,000 40,00 P3,640,00 Net income under FIFO basis 4-23 2005 P3,600,00 ( 2008 P5,000,00 2009 P7,000,000 40,000 ) 120,000 (120,000) P5,080,00 P7,530,000 650,000 (Grand Central, Inc.) Net income reported for 2009 P658,000 Adjustments: Overstatement of beginning inventory Understatement of ending inventory 71,000 Cash advance for future manufacture and delivery of goods credited to sales revenue (60,000) Correct net income for 2009 P765,000 MULTIPLE CHOICE QUESTIONS Theory MC1 d MC6 c MC2 a MC7 a MC1 MC1 29 a c MC1 MC1 d c Chapter - Inventories MC3 d MC8 d MC4 a MC9 d MC5 a MC1 a MC1 MC1 MC1 a d d MC1 MC1 MC2 d d a MULTIPLE CHOICE QUESTIONS Problems MC21 MC22 MC23 MC24 MC25 d d b a b 90,000 x 80 x 90 = 64,800; 64,800 + 5,000 = 69,800 1,500,000 + 50,000 = 1,550,000 150,000 x 85 x 90 x 95 = 109,012.50 109,012.50 x 98 = 106,832.25 (b) 450,000 ÷ 1.5 = 300,000; (d) 600,000 + 60,000 = 660,000 (e) 300,000 ÷ 1.5 = 200,000 + 30,000 = 230,000 3,000,000 + 300,000 + 660,000 + 230,000) = 4,190,000 MC26 MC27 MC28 a a b MC29 MC30 c c MC31 b MC32 MC33 c c MC34 MC35 b c MC36 a MC37 c 5,000,000 + 80,000 + 800,000 – 25,000 = 5,855,000 77,500 + 6,000 = 83,500 3,280,000 + 900,000– 80,000 = 4,100,000 x 3% =123,000; 123,000– 27,000=96,000 550,000 + 90,000 + 380,000 + 450,000 + (150,000 x 80) = 1,590,000 104,000 ÷ 1.3 = 80,000; 80,000 x 30 = 24,000 24,000 + 56,000 + (32,500 – 25,000) = 87,500 (3,000 x 35) + (2,000 x 36) + (1,000 x 37) = 214,000 Sales (4,000 x 25) + (2,000 x 26) = 152,000 Cost of goods sold 214,000 – 152,000 = 62,000 (1,600 x 8) + (4,800 x 9.60) = 58,880; 58,880 ÷ 6,400 = 9.20 400,000 + 1,280,000 –740,000 = 940,000 Direct materials used 940,000 + 960,000 + (50%x 906,000) = 2,380,000 Total mfg Cost 4,000,000 x 75% = 3,000,000 Cost of goods sold 3,000,000 + 1,310,000 – 1,500,000 = 2,810,000 Cost of goods avail for sale 2,380,000 + 1,100,000 – 2,810,000 = 670,000 600,000 + 1,500,000 – (2,240,000 ÷ 1.4) = 500,000 2,550,000 + 250,000 – 300,000 = 2,500,000 Purchases 2,800,000 + 900,000 – 700,000 = 3,000,000 Sales 3,000,000 ÷ 1.25 = 2,400,000 Cost of goods sold 180,000 + 2,500,000 – 2,400,000 = 280,000; 280,000 – 110,000 =170,000 shortage 1,040,000 + 1,550,000 = 2,590,000; 1,700,000 + 2,000,000 = 3,700,000 2,590,000 ÷ 3,700,000 = 70% 520,000 + 2,180,000 – (2,500,000 x 70%) = 950,000 950,000 – (70% x 150,000) – 95,000 = 750,000 617,000 + 1,281,000 – 21,000 + 31,000 = 1,908,000 Avail for sale at cost 1,057,000 + 2,158,000 – 35,000 = 3,180,000 Avail for sale at retail 1,908,000 ÷ 3,180,000 = 60% Cost to retail ratio 3,180,000 – 2,365,000 + 62,000 = 877,000; 877,000 – 780,000 = 97,000 97,000 x 60% = 58,200 30 Chapter - Inventories MC38 d MC39 d MC40 a MC41 MC42 a b 408,8976 ÷ 524,200 = 78%; 450,200 – 5,100 = 445,100; 445,100 x 78% = 347,178 105,650 + (378,245 – 10,295) = 473,600; 473,600 - 347,178 =126,422 126,422 – 69,738 – 5,000 = 51,684 47,075 + 213,327 + 3,400 = 263,802 Avail for sale at cost 70,025 + 306,375 = 18,900 – 7,800 – 10,640 = 376,860 Avail for sale at retail 263,802 ÷ 376,860 = 70%; 320,500 x 70% = 224,350 376,860 – 320,500 = 56,360; 56,360 – 39,390 = 16,970; 16,970 x 70% = 11,879 Repeated problem Please see Problem 4-15 Confidence: cost 22; NRV = 30 – = 27; lower is 22 Positive attitude: cost 55; NRV = 80 – 28 = 52; lower is 52 31 ... MC38 d MC39 d MC40 a MC41 MC42 a b 40 8,8976 ÷ 5 24, 200 = 78%; 45 0,200 – 5,100 = 44 5,100; 44 5,100 x 78% = 347 ,178 105,650 + (378, 245 – 10,295) = 47 3,600; 47 3,600 - 347 ,178 =126 ,42 2 126 ,42 2 – 69,738... 25,800 21,565 47 ,365 24, 244 23,121 44 , 840 67,961 41 ,47 2 26 ,48 9 b Cost of goods available for sale (25,800 + 21,565 + 44 , 840 ) P92,205 Number of units available for sale (2 ,40 0 + 1,900 + 3,800)... P200,000 6,000 P1 ,40 0,000 6,600,000 P6,800,000 Chapter - Inventories 4- 21 (Rustan’s Trading) Product A B C D Total 4- 22 Cost 102 45 24 NRV 105 42 22 10 Lower 102 42 22 Quantity 4, 000 6,000 5,500