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    Cpa Review School of The Philippines Manila: Financial Accounting and Reporting Valix/Valix/Escala/Santos/Dela Cruz

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    Cpa Review School of The Philippines Manila: Financial Accounting and Reporting Valix/Valix/Escala/Santos/Dela Cruz

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    plantationarkana
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    Cpa Review School of The Philippines Manila: Financial Accounting and Reporting Valix/Valix/Escala/Santos/Dela Cruz

    Uploaded by

    plantationarkana

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    CPA REVIEW SCHOOL OF THE PHILIPPINES

    Manila

    FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/ESCALA/SANTOS/DELA CRUZ


    BATCH 92 OCTOBER 2022 CPALE

    RETAIL METHOD

    1. An entity used the retail inventory method to approximate the ending inventory. The following
    information is available for the current year:
    Cost Retail
    Beginning inventory 650,000 1,200,000
    Purchases 9,000,000 14,700,000
    Freight in 200,000
    Purchase returns 300,000 500,000
    Purchase allowances 150,000
    Departmental transfer in 200,000 300,000
    Net markup 300,000
    Net markdown 1,000,000
    Sales 9,500,000
    Sales discounts 100,000
    Employee discounts 500,000
    Estimated normal shoplifting losses 600,000
    Estimated normal shrinkage 400,000
    1. What is the estimated cost of ending inventory using the conservative approach?
    a. 2,400,000
    b. 2,460,000
    c. 3,060,000
    d. 2,700,000
    2. What is estimated cost of ending inventory using the average cost approach?
    a. 2,560,000
    b. 2,624,000
    c. 3,264,000
    d. 2,880,000

    2. During the current year, an entity reported the following:


    Cost Retail
    Beginning inventory 560,000 1,000,000
    Purchases 4,000,000 6,200,000
    Net sales 5,400,000
    During the current year, the selling price of a certain inventory increased from P200 to P300. This
    additional markup applied to 5,000 items but was later canceled on the remaining 1,000 items. The
    following reductions were made in the retail price:
    To meet price competition 50,000
    To dispose of overstock 30,000
    Miscellaneous reductions 120,000
    1. What is the cost of ending inventory using the conventional retail method?
    a. 2,000,000
    b. 1,320,000
    c. 1,220,000
    d. 1,200,000
    2. What is the cost of ending inventory using the average retail method?
    a. 1,240,000
    b. 1,260,000
    c. 1,216,000
    d. 1,364,000
    7036
    Page 2

    3. An entity used the average cost retail method to account for inventory. The entity provided the following
    information for the current year:
    Cost Retail
    Beginning inventory and purchases 6,000,000 9,200,000
    Net markup 400,000
    Net markdown 600,000
    Sales 7,800,000
    What amount should be reported as cost of goods sold?
    a. 4,800,000
    b. 4,875,000
    c. 5,200,000
    d. 5,250,000
    4. An entity provided the following information:
    Cost Retail
    Beginning inventory 1,400,000 2,000,000
    Net purchases 5,850,000 8,000,000
    Net markup 1,500,000
    Net markdown 500,000
    Net sales 7,500,000
    What is the estimated cost of ending inventory using the FIFO retail approach?
    a. 2,275,000
    b. 2,375,000
    c. 2,310,000
    d. 2,205,000
    5. An entity provided the following data for the current year:
    Cost Retail
    Beginning inventory 1,650,000 2,000,000
    Net purchases 4,200,000 ?
    Net markup 800,000
    Net markdown 200,000
    Net sales ?
    The entity used the average retail inventory to estimate ending inventory. It was determined that
    the cost of the ending inventory was P1,950,000. If the entity used the FIFO retail method, the cost
    ratio would have been 60%.
    1. What was the amount of the net purchases at original retail before markup and markdown?
    a. 7,600,000
    b. 7,000,000
    c. 4,200,000
    d. 6,400,000
    2. What amount was reported as net sales?
    a. 9,000,000
    b. 3,000,000
    c. 6,000,000
    d. 7,000,000
    3. What amount was reported as cost of goods sold?
    a. 3,900,000
    b. 3,000,000
    c. 3,600,000
    d. 1,800,000

    End
    7036

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