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# BALIUAG UNIVERSITY

CPA REVIEW

## Units Unit cost Total cost

January Beginning balance 10,000 150 1,500,000
1
5 Purchase 10,000 180 1,800,000
15 Sale 15,000
16 Sale return 1,000
25 Purchase 4,000 200 800,000
26 Purchase return 500 200 100,000

1. Under the FIFO, what amount should be reported respectively as cost of ending inventory
and cost of goods sold?
a. 1,780,000 and 2,220,000
b. 1,790,000 and 2,210,000
c. 1,425,000 and 2,575,000
d. 1,900,000 and 2,100,000

2. Under the perpetual average method or moving average, what amount should be reported
respectively as cost of ending inventory and cost of goods sold?
a. 1,690,000 and 2,310,000
b. 1,790,000 and 2,210,000
c. 1,700,500 and 2,299,500
d. 1,616,995 and 2,383,005

3. Under the periodic average method or weighted average, what amount should be reported
respectively as cost of ending inventory and cost of goods sold?
a. 1,616,995 and 2,383,005
b. 1,790,000 and 2,210,000
c. 1,678,365 and 2,321,635
d. 1,700,000 and 2,300,000

2. During the current year, L COMPANY purchased a tract of land for P12,000,000. The entity
incurred additional cost of P3,000,000 in preparing the land for sale. The tract of land was
subdivided into residential lots as 100 Class A lots with sale price of P240,000 per lot, 100 Class
B lots with the sale price of P160,000 per lot, and 200 Class C lots with sale price of P100,000
per lot. What amount of the costs should be allocated to Class A lots?
a. 3,000,000
b. 3,750,000
c. 6,000,000
d. 7,200,000

## 3. M COMPANY provided the following data for the current year:

Inventory – January 1:
Cost 3,000,000
Net realizable value 2,800,000
Net purchases 8,000,000
Inventory – December 31:
Cost 4,000,000
Net realizable value 3,700,000

1
What amount should be reported as cost of goods sold under LCNRV?
a. 7,000,000
b. 7,100,000
c. 7,300,000
d. 7,200,000

## 4. N COMPANY provided the following information during the current year:

Product 1 Product 2
Materials and Conversion cost 3,000,000 3,600,000
Selling price 4,000,000 6,000,000
Estimated selling cost 1,200,000 1,400,000
General administration cost 600,000 1,600,000
Normal profit margin on sales 1,000,000 1,500,000

At year end, the manufacturer of the products has been completed but no selling cost has yet
been incurred. What total amount should be reported as inventory at year-end?
a. 6,400,000
b. 6,600,000
c. 4,900,000
d. 5,800,000

## 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?
a. 2,400,000
b. 2,900,000
c. 1,600,000
d. 3,100,000

6. 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?

a. 700,000
b. 615,000
c. 630,000
d. 580,000
2
7. The closing inventory of Q COMPANY amounted to P284,000 at December 31, 2017. This total
includes two inventory lines about which the inventory taker is uncertain.
 500 items which had a cost of P15 each and which were included at P7,500. These
items were found to have been defective at the balance sheet date. Remedial work after
the balance sheet date cost P1,800 and they were then sold for P20 each. Selling
expenses were P400.
 100 items that had cost P10 each but after the balance sheet date, these were sold for
P8 each with selling expenses of P150
What figure should appear in Q’s statement of financial position for inventory?
a. 283,650
b. 283,950
c. 284,000
d. 284,300

8. The closing inventory of R COMPANY amounted to P116,400 excluding the following two
inventory lines:
 400 items, which had cost P40 each. All were sold after the balance sheet date for P30
each, with selling expenses of P2,000 for the batch
 200 different items, which had cost P30 each. These items were found to be defective at
the balance sheet date. Rectification work after the balance sheet date amounted to
P1,200, after which they were sold for P35, with selling expenses totaling P300.

What figure should appear in R’s statement of financial position for inventory?
a. 116,400
b. 126,400
c. 131,900
d. 132,400

9. 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?
a. 602,000
b. 662,000
c. 782,000
d. 832,000