University of Perpetual Help System Dalta

INTERMEDIATE ACCOUNTING I RJ CARASCO

PRACTICE SET

Presented below is a list of items that may or may not reported as inventory in a company’s December 31 balance sheet.
1. Goods out on consignment at another company’s store P800,000
2. Goods sold on installment basis 100,000
3. Goods purchased f.o.b. shipping point that are in transit atDecember 31 120,000
4. Goods purchased f.o.b. destination that are in transit atDecember 31 200,000
5. Goods sold to another company, for which our company has
signed an agreement to repurchase at a set price that covers
all costs related to the inventory 300,000
6. Goods sold where large returns are predictable 280,000
7. Goods sold f.o.b. shipping point that are in transit December 31 120,000
8. Freight charges on goods purchased 80,000
9. Factory labor costs incurred on goods still unsold 50,000
10. Interest cost incurred for inventories that are routinely
manufactured 40,000
11. Costs incurred to advertise goods held for resale 20,000
12. Materials on hand not yet placed into production 350,000
13. Office supplies 10,000
14. Raw materials on which a the company has started
production, but which are not completely processed 280,000
15. Factory supplies 20,000
16. Goods held on consignment from another company 450,000
17. Costs identified with units completed but not yet sold 260,000
18. Goods sold f.o.b. destination that are in transit at
December 31 40,000
19. Temporary investment in stocks and bonds that will be
resold in the near future 500,000
How much of these items would typically be reported as inventory in the financial statements?

PROBLEM NO. 2
In connection with your audit of the Alcala Manufacturing Company, you reviewed its inventory as of December 31, 2016 and
found the following items:
(a) A packing case containing a product costing P100,000 was standing in the shipping room when the physical inventory was
taken. It was not included in the inventory because it was marked “Hold for shipping instructions.” The customer’s order was dated
December 18, but the case was shipped and the costumer billed on January 10, 2017.
(b) Merchandise costing P600,000 was received on December 28, 2016, and the invoice was recorded. The invoice was in the hands
of the purchasing agent; it was marked “On consignment”.
(c) Merchandise received on January 6, 2017, costing P700,000 was entered in purchase register on January 7. The invoice showed
shipment was made FOB shipping point on December 31, 2016. Because it was not on hand during the inventory count, it was not
included.
(d) A special machine costing P200,000, fabricated to order for a particular customer, was finished in the shipping room on
December 30. The customer was billed for P300,000 on that date and the machine was excluded from inventory although it was
shipped January 4, 2017.
(e) Merchandise costing P200,000 was received on January 6, 2017, and the related purchase invoice was recorded January 5. The
invoice showed the shipment was made onDecember 29, 2016, FOB destination.
(f) Merchandise costing P150,000 was sold on an installment basis on December 15. The customer took possession of the goods on
that date. The merchandise was included in inventory because Alcala still holds legal title. Historical experience suggests that full
payment on installment sale is received approximately 99% of the time.
(g) Goods costing P500,000 were sold and delivered on December 20. The goods were included in the inventory because the sale
was accompanied by a purchase agreement requiring Alcala to buy back the inventory in February 2017.

how much of these items should be included in the inventory balance at December 31, 2016?

Problem 3.
Moneba Company bought merchandise on January 2, 2016 from Lynn Company costing P15,000; terms, less 20%, 20% down
payment, balance 2/10, n/30. Two days after, P2,000 worth of merchandise was returned due to wrong specification. Moneba
Company paid the account within the discount period. How much Moneba Company paid to Lynn Company?

Problem 4.
Listed below are some items of inventory from Anecito Company The company stores a substantial portion of the merchandise in a
separate warehouse and transfer damaged goods to a special inventory account.
1. Items in receiving department returned by customer, no communication received from customer 20,000
2. Items ordered and in receiving department, invoice not yet received from supplier 50,000
3. Items counted in warehouse by the inventory crew 70,000
4. Invoice received for goods ordered, goods shipped but not received (Anecito Company pays freight) 5,000
5. Items, shipped today, fob destination, invoice mailed to customer 5,000
6. Items currently used for window displays 10,000
7. Items on counter for sale per inventory count [not in (3)] 90,000
8. Items in shipping department, invoice not mailed to customer 6,000
9. Items in receiving department, refused by Anecito because of Damage [(not in (3)] 3,000
10. Items shipped today, fob shipping point, invoice mailed to customer 4,000
11. Items included in warehouse count, damaged, not returnable 8,000
12. Items included in warehouse count, specifically crafted and segregated for shipment to customer in five days per sales
contract, with return privilege. 18,000
:
If the recorded inventory in the balance sheet is P289,000, the year-end inventory will
be overstated by:

Problem 5.
The following information pertained to Azur Co. for the year:
Purchases P 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?

Problem 6
The following information was obtained from Smith Co.:
Sales P275,000
Beginning inventory 30,000
Ending inventory 18,000

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