Sie sind auf Seite 1von 5

JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS, INC.

UNIVERSITY OF THE PHILIPPINES VISAYAS

REVIEWER IN ACCOUNTING THEORY & PRACTICE I

INVENTORIES
The following information pertained to Azur Co. for the year:
Purchases
$ 102,800
Purchase discounts
10,280
Freight-in
15,420
Freight-out
5,140
Beginning inventory
30,840
Ending inventory
20,560
What amount should Azur report as cost of goods sold for the year?
Answer:

$ 118,220

$ 30,840 + (102,800 10,280 + 15,420) 20,560

During 1994, Kam Co. began offering its goods to selected retailers on a consignment basis. The
following information was derived from Kam's 1994 accounting records:
Beginning inventory
Purchases
Freight in
Transportation to consignees
Freight out
Ending inventory-held by Kam
Ending inventory-held by consignees

$122,000
540,000
10,000
5,000
35,000
145,000
20,000

In its 1994 income statement, what amount should Kam report as cost of goods sold?
Answer:

$ 512,000

Beginning inventory
Add: Purchases
Freight in
Transport to consignees
COGAS
Less: Ending inventory
Cost of goods sold

$ 122,000
540,000
10,000
5,000
677,000
(165,000)
$ 512,000

Consignors ending inventory must include consigned goods in the hands of the
consignee at cost plus warehousing costs before goods are transferred to
consignee plus shipping costs to consignee.
The following information was obtained from Smith Co.:
Sales
Beginning inventory
Ending inventory
Source: Becker CPA Review

$275,000
30,000
18,000
Page 1 of 5

Smith's gross margin is 20%. What amount represents Smith purchases?


Answer:
$ 208,000
$ 30,000 + Purchases $ 18,000 = $ 220,000 (275,000 x 80%)
During January 1993, Metro Co., which maintains a perpetual inventory system, recorded the
following information pertaining to its inventory:
Units Unit Cost Total cost Units on hand
Balance on 1/1/93
1,000
$1
$1,000
1,000
Purchased on 1/7/93
600
3
1,800
1,600
Sold on 1/20/93
900
700
Purchased on 1/25/93
400
5
2,000
1,100
Under the moving-average method, compute the amount of inventory at Jan 31, 1993?
Answer:

$ 3,225
Balance 1/1/93
Purchased 1/7/93
Balance 1/7/93
Sold 1/20/93
Balance 1/20/93
Purchased 1/25/93
Balance 1/31/93

Units
1,000
600
1,600
(900)
700
400
1,100

Unit Cost
$1.00
3.00
1.75
1.75
1.75
5.00
2.93

Total Cost
$1,000
1,800
2,800
(1,575)
1,225
2,000
3,225

Anders Co. uses the moving-average method to determine the cost of its inventory. During
January 1992, Anders recorded the following information pertaining to its inventory:
Units
Unit Cost Total Cost
Balance on 1/1/92
40,000
$5
$200,000
Sold on 1/17/92
35,000
Purchased on 1/28/92
20,000
8
160,000
What amount of inventory should Anders report in its January 31, 1992, balance sheet?
Answer:

$ 185,000
Balance 1/1/92
Sold 1/17/92
Balance 1/17/92
Purchased 1/28/92
Balance 1/31/92

Units Unit Cost


40,000
$5.00
(35,000)
5.00
5,000
5.00
20,000
8.00
25,000
7.40

Total Cost
$200,000
(175,000)
25,000
160,000
185,000

Nomar Co. shipped inventory on consignment to Seabright Co. that cost $20,000. Seabright paid
$500 for advertising that was reimbursable from Nomar. At the end of the year, 70% of the
inventory was sold for $30,000. The agreement states that a commission of 20% will be provided
to Seabright for all sales. What amount of net inventory on consignment remains on the balance
sheet for the first year for Nomar?
Answer:

$ 6,000

In this
not
Source: Becker CPA Review

The cost of consigned inventory includes the cost of the inventory


and any costs needed to get the inventory in place for sale.
question, that is $20,000. The $500 paid for advertising is
included in the cost of the inventory. At the end of the year,
Page 2 of 5

30% of

the original inventory remains on the balance sheet.

A flash flood swept through Hat, Inc.'s warehouse on May 1. Hat's accounting records showed
the following:
Inventory, January 1
Purchases, January 1 through May 1
Sales, January 1 through May 1
Inventory not damaged by flood
Gross profit percentage on sales

$ 35,000
200,000
250,000
30,000
40%

What amount of inventory was lost in the flood?


Answer:

$ 55,000

End Inv = $35,000 + $200,000 - ($250,000 x (1-.40)) = $85,000


Inv lost in the flood = $85,000 - $30,000 = $55,000

Trans Co. uses a periodic inventory system. The following are inventory transactions for the
month of January:
1/1 Beginning inventory
1/5 Purchase
1/15 Purchase
1/20 Sales at $10 per unit

10,000 units at $3
5,000 units at $4
5,000 units at $5
10,000 units

Trans uses the average pricing method to determine the value of its inventory. What amount
should Trans report as cost of goods sold on its income statement for the month of January?
Answer:

$ 37,500

The average purchase price of the units available for sale is


(10,000x3) + (5,000x4) + (5,000x5) / (10,000+5,000+5,000)= $3.75.
Thus the cost of goods sold is 10,000 x $3.75 = $37,500.

On December 28, 1990, Kerr Manufacturing Co. purchased goods costing $50,000. The terms
were F.O.B. destination. Some of the costs incurred in connection with the sale and delivery of
the goods were as follows:
Packaging for shipment
Shipping
Special handling charges

$1,000
1,500
2,000

These goods were received on December 31, 1990. In Kerr's December 31, 1990, balance
sheet, what amount of cost for these goods should be included in inventory?
Answer:

$50,000

F.O.B. destination means that title passes when received by the


buyer, and that packaging, shipping, and handling are costs of the
seller.

The following information applied to Fenn, Inc. for 1989:


Merchandise purchased for resale
Freight in
Freight out
Purchase returns
Source: Becker CPA Review

$400,000
10,000
5,000
2,000
Page 3 of 5

Fenn's 1989 inventoriable cost was:


Answer:
$ 408,000
$ 400,000 2,000 + 10,000
Rabb Co. records its purchases at gross amounts but wishes to change to recording purchases
net of purchase discounts. Discounts available on purchases recorded from October 1, 1991, to
September 30, 1992, totaled $2,000. Of this amount, $200 is still available in the accounts
payable balance. The balances in Rabb's accounts as of and for the year ended September 30,
1992, before conversion are:
Purchases
Purchase discounts taken
Accounts payable

$100,000
800
30,000

What is Rabb's accounts payable balance as of September 30, 1992, after the conversion?
Answer:

$ 29,800

$ 30,000 200

Stone Co. had the following consignment transactions during December 1991:
Inventory shipped on consignment to Beta Co.
$18,000
Freight paid by Stone
900
Inventory received on consignment from Alpha Co.
12,000
Freight paid by Alpha
500
No sales of consigned goods were made through December 31, 1991. Stone's December 31,
1991, balance sheet should include consigned inventory at:
Answer:

$18,900

The $18,000 inventory plus $900 freight out should be included as


consigned inventory since Stone is consignor for the goods sent to
Beta and still holds title.

The following information appeared in the accounting records of a retail store for the year ended
Dec 31, 1988:
Sales
$ 300,000
Purchases
$ 140,000
Jan 1 Inventories
$ 70,000
Dec 31 Inventories $ 100,000
Sales commissions $ 10,000
The gross margin was:
Answer:

$ 190,000

$ 300,000 (70,000 + 140,000 100,000)

West Retailers purchased merchandise with a list price of $20,000, subject to trade discounts of
20% and 10%, with no cash discounts allowable. West should record the cost of this
merchandise as:
Answer:

$ 14,400

$ 20,000 x 80% x 90%

On June 1, 1989, Pitt Corp. sold merchandise with a list price of $5,000 to Burr on account. Pitt
allowed trade discounts of 30% and 20%. Credit terms were 2/15, n/40 and the sale was made
FOB shipping point. Pitt prepaid $200 of delivery costs for Burr as an accommodation. On
June 12, 1989, Pitt received from Burr a remittance in full payment amounting to:
Source: Becker CPA Review

Page 4 of 5

Answer:

$ 2,944

$ 5,000 x 70% x 80% x 98% = $ 2,744


$ 2,744 + 200 = $ 2,944

The following items were included in Opal Co.'s inventory account at December 31, 1992:
Merchandise out on consignment, at sales price,
Including 40% mark-up on selling price
$ 40,000
Goods purchased, in transit, shipped F.O.B. shipping point
36,000
Goods held on consignment by Opal
27,000
By what amount should Opal's inventory account at December 31, 1992, be reduced?
Answer:

$ 43,000

The 40% mark-up and the goods held on consignment must be


eliminated to record inventory at cost. The $36,000 of goods
shipped FOB shipping point should be included in inventory.
40% $40,000 = $16,000 plus $27,000 = $43,000.

Garnett Co. shipped inventory on consignment to Hart Co. that originally cost $50,000. Hart paid
$1,200 for advertising that was reimbursable from Garnett. At the end of the year, 40% of the
inventory was sold for $32,000. The agreement stated that a commission of 10% will be
provided to Hart for all sales. What amount should Garnett report as net income for the year?
Answer:

$ 7,600

Source: Becker CPA Review

Sales
$ 32,000
Cost of Sales (40% of 50,000)
(20,000)
Gross Profit
12,000
Selling Expense
Advertising
1,200
Commission
3,200
(4,400)
Net Income
$ 7,600

Page 5 of 5