Ateneo de Zamboanga University

School of Management and Accountancy

Financial Accounting, Part I

Assignment 6: Inventory estimation

Instructor: Kelvin Jaluag Culajara, BSA, CPA

Case 1: Gross profit method

Compute for the ending inventory using the following data:
Beginning inventory, P100,000
Net purchases, P500,000
Net sales, P700,000
Gross profit rate based on sales is 40%

Case 2: Gross profit method

Compute for the ending inventory using the following data:
Beginning inventory, P200,000
Net purchases, P1,000,000
Net sales, P1,260,000
Gross profit rate based on cost is 40%

Case 3: Gross profit method

The following data are gathered for the current year:
Inventory, beginning, P600,000
Purchases return, P2,530,000
Purchase return, P15,000
Purchase allowance, P5,000
Purchase discount, P10,000
Freight in, P50,000
Sales, P3,100,000
Sales return, P100,000
Sales allowance, P50,000
Sales discount, P150,000

Compute for the ending inventory using the following independent assumptions:
Gross profit rate is 25% on sales
Gross profit rate is 25% on cost

Case 4: Retail inventory method

Use the following data:
Cost Retail
Beginning inventory 180,000 250,000
Net purchases 1,020,000 1,575,000
Additional markup 200,000
Markup cancelation 25,000
Markdown 140,000
Markdown cancelation 15,000
Sales 1,450,000
Sales return 50,000
Sales allowance 10,000
Sales discount 20,000
Employee discount 40,000
Spoilage and breakage 35,000

Compute the ending inventory under each of the following approaches:

Conservative approach
Average cost approach
Case 4: Retail inventory method
Use the following data:
Cost Retail
Beginning inventory 495,000 900,000
Net purchases 1,800,000 3,300,000
Net markup 300,000
Net markdown 600,000
Net sales 2,700,000

Compute for the ending inventory using the FIFO retail approach