INTERMEDIATE ACCOUNTING 1 INVENTORIES What is the total amount to be charged to inventory?

a. P106,700 b. P105,500 c. P105,000 d. P103,000

PRACTICE QUESTIONS
1) ABC Co. asks you to review its December 31, 2023, inventory values and prepare the necessary adjustments to the 4) ABC Co. regularly buys shirts from JKL Co. and is allowed trade discounts of 20% and 10% from the list price. ABC
books. The ff. information is given to you: purchased shirts from JKL on May 27 and received an invoice with a list price of P100,000 and payment terms 2/10,
a. ABC uses the periodic method of recording inventory. A physical count reveals P2,348,900 inventory on hand at Dec. n/30. If ABC uses the net method of recording purchases, the journal entry to record the payment on June 8 will include:
31, 2023. a. A debit to Accounts Payable of P72,000 b. A debit to Purchase Discounts Lost of P1,440
b. Not included in the physical count of inventory is P134,200 of merchandise purchased on December 15 from DEF. This c. A credit to Purchase Discounts of P1,440 d. A credit to Cash of P70,560
merchandise was shipped FOB shipping point on December 29 and arrived in January. The invoice arrived and was
recorded on December 31. 5) ABC Co. purchased merchandise during 2022 on credit for P200,000; terms 2/10, n/30. All of the gross liability except
c. Included in inventory is merchandise sold to GHI on December 30, fob destination. This merchandise was shipped after P40,000 was paid within the discount period. The remainder was paid within the 30-day term. At the end of the annual
it was counted. The invoice was prepared and recorded as a sale on account for P128,000 on December 31. The accounting period, December 31, 2022, 90% of the merchandise had been sold and 10% remained in inventory. The entity
merchandise cost P73,500 and GHI received it on January 3. has no beginning inventory. The entity uses net method of recording purchases.
d. Included in inventory was merchandise received from JKL on December 31 with an invoice price of P156,300. The
merchandise was shipped FOB destination. The invoice, which has not yet arrived, has not been recorded. If the entity used the gross method of recording purchases instead of the net method, the reported cost of goods sold
e. Not included in inventory is P85,400 of merchandise purchased from Integrated Industries. The merchandise was would have been _________________.
received on December 31 after the inventory had been counted. The invoice was received and recorded on December 30. a. the same b. higher by P720 c. Lower by P720 d. P176,400
f. Included in inventory was P104,380 of inventory held by ABC on consignment for MNO Industries.
g. Included in inventory is merchandise sold to PQR Enterprises, fob shipping point. This merchandise was shipped after The following information was available from the inventory records of ABC Company for January: (Use the data for 6-7)
it was counted. The invoice was prepared and recorded as a sale for P189,000 on December 31, The cost of this
merchandise was P105,200, and PQR received the merchandise on January 5.
h. Excluded from inventory was carton labeled “Please accept for credit.” This carton contains merchandise costing
P15,000 which had been sold to a customer for P25,000. No entry had been made to the books to reflect the return, but
none of the returned merchandise seemed damaged.

The adjusted inventory cost of ABC Co. at December 31, 2023 should be _____________.
a. P2,217,620 b. P2,396,320 c. P2,411,320 d. P2,373,920
6) Assuming that ABC does not maintain perpetual inventory records, what should be the inventory at January 31, using
2) The inventory on hand at December 31, 2023 for ABC Co. valued at a cost of P947,800. The ff. items were not included the weighted-average inventory method, rounded to the nearest dollar?
in this inventory amount: a. €12,606. b. €12,284. c. €12,312. d. €12,432.
a. Purchased goods, in transit, shipped FOB destination invoice price P32,000, which included freight charges of P1,600.
b. Goods held on consignment by ABC Co. at a sales price of P28,000, including sales commission of 20% of sales price. 7) Assuming that ABC maintains perpetual inventory records, what should be the inventory at January 31, using the
c. Goods sold to XYZ Co., under terms FOB destination, invoiced for P18,500 which includes P1,000 freight charges to moving-average inventory method, rounded to the nearest dollar?
deliver the goods. Goods are in transit. a. €12,606. b. €12,284. c. €12,312. d. €12,432.
d. Purchased goods in transit, terms FOB seller, invoice price P48,000 and freight cost, P3,000.
e. Goods put on consignment to JKL Co., sales price P36,400, shipping cost of P2,000 8) ABC Co. has the following data related to an item of inventory:

Assuming that the company’s selling price is 140% of inventory cost, the adjusted cost of ABC Company’s inventory at
December 31, 2023 should be _____________.
a. P1,040,300 b. P1,039,500 c. P1,055,700 d. 1,037,300
The value assigned to cost of goods sold if ABC Co. uses FIFO is _______________.
3) On December 15, 2023, ABC Co. purchased goods costing P100,000. The terms were FOB shipping point. Costs a. £579. b. £552. c. £1,723. d. £1,696.
incurred by ABC Co. in connection with the purchase and delivery of the goods were as follows:
Normal Freight Charges P3,000 Transactions for the month of June were: (Use the data for 9 & 10)
Handling Costs 2,000
Insurance on shipment 500
Abnormal Freight charges for express shipping 1,200
9) Assuming that perpetual inventory records are kept in dollars, the ending inventory on a FIFO basis is The gain on reversal of inventory writedown is
a. €4,110. b. €4,160. c. €4,290. d. €4,470. a. P33,000 b. P11,000 c. P8,000 d. P0

10) Assuming that perpetual inventory records are kept in units only, the ending inventory on an average-cost basis, 15) ABC Development Co. bought a 10-hectare land in Pasil, Cebu, to be improved, subdivided into lots, and eventually
rounded to the nearest dollar sold. Purchase price of the land was P58,000,000. Taxes and documentation expenses on the transfer of the property
a. €4,096. b. €4,238. c. €4,290. d. €4,322. amounted to P800,000. The lots were classified as follows:
LOT CLASS NO. OF LOTS SELLING PRICE PER LOT TOTAL CLEARING COSTS
11) A company determined the following values for its inventory as of the end of its fiscal year: A 10 P1,000,000 None
Historical cost P100,000 B 20 800,000 P1,000,000
Current replacement cost 70,000 C 40 700,000 3,000,000
Net realizable value 90,000 D 50 600,000 8,000,000
Net realizable value less a normal profit margin 85,000
Fair value 95,000 Purchase and improvement costs allocated for class B lots under the relative sales value method of inventory valuation:
a. P13,485,700 b. P10,800,000 c. P12,200,000 d. P12,047,600
What amount should the company report as inventory on its balance sheet?
a. P70,000 b. P85,000 c. P90,000 d. P95,000 16-17. On Nov. 15, 2017, Perseverance Co. entered in to a commitment to purchase 200,000 units of raw material to
Persistent for P8,000,000 on Mar. 15, 2018. Perseverance Co. entered into this purchase commitment to protect itself
12) The closing inventory at cost of a company at 31 December 2023 amounted to P284,700. The following items were against the volatility in the price of raw material X. By Dec. 31, 2017 the purchase price of material X had fallen to P35 pe r
included at cost in the total: unit.
• 400 coats, which had cost P80 each and normally sold for P150 each. Owing to a defect in manufacture, they 16. How much will be recognized as loss on purchase commitment on Mar. 15, 2018 if the price of the material had fallen
were all sold after the reporting date at 50% of their normal price. Selling expenses amounted to 5% of the further to P32 per unit?
proceeds a. P1,200,000 b. P1,000,000 c. P600,000 d. P0
• 800 skirts, which had cost of P20 each. These too were found to be defective. Remedial work in February 2019
cost P5 per skirt, and selling expenses for the batch totaled P800. They were sold for P28 each. 17. How much will be recognized as a gain on purchase commitment on Mar. 15, 2018 if the price of the material had
What should the inventory value be according to PAS 2 Inventories after considering the above items? risen to P42 per unit?
a. P281,200 b. P282,100 c. P282,800 d. P329,200 a. P1,400,000 b. P1,000,000 c. P400,000 d. P0

13) The ABC Co. included the ff. in its unadjusted trial balance as of December 31, 2023: 18. On May 6, 2023, a flash flood caused damage to the merchandise stored in the warehouse of ABC Co. You were
Inventory, 12/31/2023 P 19,450,000 asked to submit an estimate of the merchandise destroyed in the warehouse. The ff. data were established:
Purchases 127,850,000 a. Net sales for 2023 were P800,000, matched against cost of P560,000.
Available for sale P 147,300,000 b. Merchandise inventory, Jan. 1, 2023 was P200,000, 90% of which was in the warehouse and 10% in downtown
The inventory at December 31, 2023 was counted at a cost of P14.5M. This includes P500,000 of slow-moving inventory showrooms.
that is expected to be sold for a net amount of P300,000. c. For Jan. 1, 2023 to date of flood, you ascertained invoice value of purchases (all stored in the warehouse), P100,000;
freight inward, P4,000; purchases returned, P6,000.
The cost of sales for the year ended December 31, 2023 is _____________. d. Cost of merchandise transferred from the warehouse to show rooms was P8,000 and net sales from Jan. 1 to May 6,
a. P133,100,000 b. P133,000,000 c. P132,800,000 d. P132,600,000 2023 (all warehouse stock) were P320,000.

14) ABC Co. installs replacement siding, windows, and louvered glass doors for family homes. At December 31, 2023, the Assuming gross profit rate in 2023 to be the same as in the previous year, the estimated merchandise destroyed by the
balance of inventory account was P502,000, and the allowance for inventory write-down was P33,000. The inventory cost flood was _____________.
and other data at December 31, 2023 are as ff: (amounts in thousands) a. P80,000 b. P66,000 c. P50,000 d. P46,000

Item Cost Replacement Cost Sales Price NRV Normal Profit

A P89 P86 P91 P87 P5
B 94 92 93 85 7
C 125 135 129 111 10
D 194 114 205 197 20
Total P502 427 518 480 P42