GROSS+PROFIT+METHOD_ASSIGNMENT

GROSS PROFIT METHOD
INSTRUCTIONS: Provide what is being asked in each item. Write your answers with solutions
in your assignment notebook. This will be submitted during our class session on September 17,
2024.
1. An entity reported the following data during the current year:

Beginning inventory 500,000
Net purchases 2,500,000
Net sales 3,500,000
A physical count at year-end resulted in an inventory of P600,000. The gross profit had
remained constant at 40%. The entity suspected that some inventory may have been taken
by a new employee. What amount should be reported as estimated cost of missing
inventory at year-end?
2. An entity reported the following information for the current year:

Inventory, January 15,000,000
Purchases 36,000,000
Freight in 2,000,000
Purchase returns and allowances 3,500,000
Purchase discounts 1,500,000
Sales 43,000,000
Sales returns 3,000,000
Sales discounts 1,000,000
A physical inventory taken at year-end resulted in an ending inventory of P3,000,000.
At year-end, unsold goods out on consignment with selling price of P1,000,000 are in the
hands of a consignee. The gross profit was 25% on cost. What amount should be
reported as estimated cost of inventory shortage?
3. On December 31, 2022, a fire destroyed most of the merchandise inventory of an entity.
All goods were completely destroyed except for partially damaged goods that normally
sell for P100,000 and that had an estimated net realizable value of P25,000 and
undamaged goods that normally sell for P300,000. The entity provided the following data
for 2022:
Inventory, January 1 600,000
Net purchases 4,300,000
Net sales 5,600,000
Total 2021 2020 2019

Net sales 9,000,000 5,000,000 3,000,000 1,000,000
Cost of goods sold 6,750,000 3,840,000 2,200,000 710,000
Gross income 2,250,000 1,160,000 800,000 290,000
What amount should be reported as estimated amount of fire loss on December 31, 2022?
4. At year-end a storm surge damaged the warehouse of an entity. The entire

inventory and many accounting records were completely destroyed.
January 1 December 31
Inventory 1,500,000
Purchases 5,500,000
Cash sales 900,000
Collections of accounts receivable 8,400,000
Accounts receivable 700,000 1,100,000
Gross profit rate on sales 40%
What is the inventory loss from the storm surge?
5. At the end of current year, a fire damaged the warehouse and factory of an entity completely
destroying the goods in process inventory. There was no damage to either the raw
materials or finished goods. The physical inventory revealed the following.
January 1 December 31
Raw materials 1,700,000 2,000,000
Goods in process 4,300,000 0
Finished goods 6,000.000 4,500,000
Factory supplies 500,000 400,000
The gross profit margin historically approximated 30% of sales. The sales for the year
amounted to P20,000,000. Raw material purchases totaled P4,000,000. Direct labor costs
amounted to P5,000,000 and manufacturing overhead was applied at 60% of direct labor.
1. What is the cost of raw materials used?
2. What is the total manufacturing cost?
3. What is the cost of goods manufactured?
4. What is the cost of goods sold?
5. What is the cost of the goods in process inventory destroyed in the fire?
6. O COMPANY reported the following information for 2017:

Inventory, January 1 5,000,000
Purchases 26,000,000
Freight in 2,000,000
Purchases returns and allowances 3,500,000
Purchase discounts 1,500,000
Sales 30,000,000
Sales returns 3,000,000
Sales discounts 1,000,000
A physical inventory taken on December 31, 2017 resulted in an ending inventory of
P4,000,000. On December 31, 2017, unsold goods out on consignment with selling price
of P1,000,000 are in the hands of a consignee. The gross profit was 25% on cost. On
December 31, 2017, what is the estimated cost of inventory shortage?
7. On the night of December 31, 2017, a fire destroyed most of the merchandise inventory of P
COMPANY. All goods were completely destroyed except for partially damaged goods that
normally sell for P100,000 and that had an estimated net realizable value of P25,000 and
undamaged goods that normally sell for P60,000.
Inventory, January 1, 2017 600,000
Net purchases for 2017 4,300,000
Net sales for 2017 5,600,000
Total 2016 2015 2014

Net Sales 9,000,000 5,000,000 3,000,000 1,000,000
Cost of Sales 6,750,000 3,840,000 2,200,000 710,000
Gross Income 2,250,000 1,160,000 800,000 290,000
What is the estimated amount of fire loss on December 31, 2017?
8. On September 30, 2017, a fire at S COMPANY’s only warehouse caused severe damage to its
entire inventory. Based on recent history, S has a gross profit of 30% of net sales. The following
information is available from S’s records for the nine months ended September 30, 2017:
Inventory at January 1, 2017 550,000
Total purchases received and recorded from January to date of fire 3,000,000
Total freight cost of goods purchased and received 60,000
Total credit memo received on goods purchased and received 200,000
Total discounts taken on purchases 80,000
Invoice received for goods purchased but still in transit shipped on
September 30, 2017, FOB shipping point 120,000
Total sales delivered and recorded from January to date of fire 3,600,000
Unrecorded sales invoice for goods delivered 300,000
Total sales returns accounted and recorded to date of fire 160,000
Total sales discounts taken by customers on recorded sales 40,000
A physical inventory disclosed usable damaged goods which S estimates can be sold to a
jobber for P50,000. Using the gross profit method, what amount of impairment loss on its
inventory should S report in its December 31, 2017 profit or loss?

GROSS+PROFIT+METHOD_ASSIGNMENT

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GROSS PROFIT METHOD

1. An entity reported the following data during the current year:

2. An entity reported the following information for the current year:

Total 2021 2020 2019

4. At year-end a storm surge damaged the warehouse of an entity. The entire

6. O COMPANY reported the following information for 2017:

Total 2016 2015 2014

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