1. The New York Company Mfg. Co.

in its Balance sheet as of December 31,2014 has an inventory in

the amount of P176,000 which consists of :

Direct Materials P 99,000

Direct Materials purchases in transit, FOB Destination 21,600
Direct Materials purchases in transit, FOB Shipping Point 16,200
Prepaid insurance on Inventory 3,600
Work in Process 68,400
Finished Goods 81,000
Goods shipped on consignment, at selling price with 20% profit on sales 27,000

What is the cost of inventory to be shown in the statement of financial position of New York Mfg.
as of December 31,2014?
a. 287,100 c. 268,200
b. 286,200 d. 264,600

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2. The Philadelphia Company sells TVs. The perpetual inventory was stated as P305,000 on the

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books at December 31,2014. At the close of the year, a new approach of compiling inventory was

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used and apparently a satisfactory cut-off for preparation of financial statements was not made.
Some events that occurred as follows:

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a. TVs shipped to a customer January 2,2015, costing P50,000 were included in nventory at
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December 31,2014. The sale was recorded in 2012
b. TVs costing P100,000 received December 30,2014 were recorded as received on January
2,2015.
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c. Tvs received during 2011 costing P 46,000 were recorded twice in the inventory account.
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d. TVs shipped to a customer December 28.2014 FOB Shipping Point, which cost P150, were
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not received by the customer until January 2012. The TVS were included in the ending
inventory.
e. TVs on hand that cost P61,000 were never recorded in the books.
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Compute the correct inventory at December 31,2014.

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a. 320,000 c. 220,000
b. 259,000 d. 270,000
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Use the following information for the next two questions.

Indiana uses the perpetual inventory system. Indiana’s inventory transactions for August 2014 were as
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follows:
NO. Unit Cost Total Cost
01 Aug Beg. Inventory 20 P4.00 P80
07 Aug Purchases 10 4.20 42.00
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10 Aug Purchases 20 4.30 86.00

12 Aug Sales 15 ? ?
16 Aug Purchases 20 4.60 92.00
20 Aug Sales 40 ? ?
28 Aug Sales Returns 3 ? ?

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 3. Using the following information, assume that the Indiana uses the FIFO cost flow method and
that the sales returns relate to 20 August sales. The sales return should be costed back into
inventory at what unit cost?
a. P4.00 c. P4.07
b. P4.30 d. P4.60
4. Assuming that Indiana uses the weighted average cost flow method, the 12 August sales should
be costed at what unit cost?
a. P4.16 c. P4.07
b. 4.30 d. P4.60
5. On June30,2014, a flash flood damaged the warehouse and factory of Detroit Corp., completely
destroying the work in process inventory. There was no damage to either the raw materials or
finished good inventories. A physical inventory taken after the flood revealed the folloeing
valuations:
Finished Goods P112,000
Work in Process 0
Raw Materials 52,000

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The inventory on January 1,2011, consisted of the following.

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Finished Goods P112,000

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Work in Process 0

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Raw Materials 52,000

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P 277,500

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A review of the books and records disclosed that the gross profit margin historically
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approximated 34% of sales. The sales for the first 6 mos. Of 2014 were P428,000. Raw materials
purchases were P96,000. Direct labor costs for this period were P 130,000, and manufacturing
overhead has historically been appliedat 60% of Direct Labor Cost.
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Compute the value of thr work in process inventory lost on June 30,2011.
a. P135,020 c. 271,980
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b. P119,020 d. P92,220
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6. Gillard Enterprises Inc. a retailer of Italian furniture and has five major product lines: sofas,
dining tables, beds, closets, and lounge chairs. At December 31, 2014, quantity on hand, cost per
unit, and net realizable value (NRV) per unit of the product lines are as follows:
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Product line
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Quantity Cost per unit NRV per unit

Sofas 100 P1000 P1020
Dining Tables 200 500 450
Beds 300 1500 1600
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Closets 400 750 770

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Lounge Chairs 500 250 200

In Gillard’s December 31,2014 statement of financial position, Inventory should be carried at

a. P1,075,000 c. P 1,080,000
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b. P 1,040,000 d. P 1,115,00

7. Ovation Company asks you to review its December31, 2010, inventory values and prepare the
necessary adjustments to the books. The following information is given to you.

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 a. Ovation uses the periodic method of recording inventory. A physical count reveals P2,348,900
inventory on hand at December31, 2010.
b. Not included in the physical count of inventory is P134,200 of merchandise purchased on December
15 from Standing. This merchandise was shipped f.o.b. shipping point on December 29 and arrived
in January. The invoice arrived and was recorded on December
31.
c. Included in inventory is merchandise sold to Oval on December 30, f.o.b. destination. This
merchandise was shipped after it was counted. The invoice was prepared and recorded as a sale on
account for P128,000 on December 31. The merchandise cost P73,500, and Oval received it on January
3.
d. Included in inventory was merchandise received from Owl on December 31 with an
invoice price of P156,300. The merchandise was shipped f.o.b destination. The invoice, which has
not yet arrived, has not been recorded.
e. Not included in inventory is P85,400 of merchandise purchased from Oxygen Industries. The
merchandise was received on December 31 after the inventory had been counted. The invoice was
received and recorded on December 30.

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f. Included in inventory was P104,380 of inventory held by Ovation on consignment from

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Ovoid Industries.

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g. Included in inventory is merchandise sold to Kemp f.o.b. shipping point. This merchandise was

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shipped after it was counted. The invoice was prepared and recorded as a sale for P189,000 on

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December 31. The cost of this merchandise was P105,200, and Kemp received the merchandise on
January 5.
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h. Excluded from inventory was carton labeled “Please accept for credit.” This carton contains
merchandise costing P15,000 which had been sold to a customer for P25,000. No entry had been
made to the books to reflect the return, but none of the returned merchandise seemed damaged.
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The adjusted inventory cost of Ovation Company at

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a. P2,217,620 c. P2,411,320 b. P2,396,320 d. P2,373,920

8. Buyer Co. regularly buys shirts from Vendor Company and is allowed trade discounts of 20%
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and 10% from the list price. Buyer purchased shirts from Vendor on May 27, 2010 and received an
invoice with a list price of P100,000 and payment terms 2/10, n/30. If Buyer uses the net method
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of recording purchases, the journal entry to record the payment on June 8, 2010 will include a.
A debit to Accounts payable of P72,000.
b. A debit to Purchase Discounts Lost of P1,440.
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c. A credit to Purchase Discounts of P1,440.

d. A credit to Cash of P70,560.
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9. The records of Binmaley’s Department Store report the following data for the month of
January 2010:
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Sales P7,100,000
Sales allowance 100,000
Sales returns 500,000
Employee discounts 200,000
Theft and other losses 100,000
Initial markup on purchases 2,900,000
Additional mark up 250,000

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 Mark up cancellations 100,000
Mark down 600,000
Mark down cancellations 100,000
Freight on purchases 100,000
Purchases at cost 4,500,000
Purchase returns at cost 240,000
Purchase returns at sales price 350,000
Beginning inventory at cost 440,000
Beginning inventory at sales price 800,000

Using the average retail inventory method, Binmaley’s ending inventory is

a. P360,000 c. P420,000 b. P384,000 d. P448,000

9. A public limited company, Cromwell Dairy Products, produces milk on its farms. As
of January 1, 2010 Cromwell has a stock of 1,050 cows (average age, 2 years old) and 150 heifers
(average age, 1 year old). Cromwell purchased
375 heifers, average age 1 year old, on July 1,
2010. No animals were born or sold during the year. The unit values less estimated costs to sell
were

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1 - year old animal at December 31, 2010 P3,200

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2 - year old animal at December 31, 2010 4,500
1.5 - year old animal at December 31, 2010 3,600

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3 - year old animal at December 31, 2010 5,000
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1 - year old animal at Jan. 1, 2010 and July 1,
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2010 3,000
2 - year old animal at January 1, 2010 4,000
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The increase in value of biological assets in 2010 due to price changes is

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a. P1,500,000 c. P555,000
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b. P 630,000 d. P460,000

[Link] Tiger Corporation included the following in its unadjusted trial balance as of December 31,
2011:
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Inventory, 12/31/10 P 19,450,000

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Purchases 127,850,000

Additional information:
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 The inventory at December 31, 2011 was counted at a cost of P8.5 million. This includes
P500,000 of slow moving inventory that is expected to be sold for a net amount of P300,000.
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 Sales include P8 million for goods sold in December 2011 for cash to Beer Finance Company.
The cost of these goods was P6 million. Beer Finance Company has the option to require Tiger
to repurchase these goods within one month of year-end at their original selling price plus a
facilitating fee of P250,000.
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The cost of sales for the year ended December 31, 2011 is
a. P138,800,000 c. P132,800,000
b. P133,000,000 d. P139,000,000

1. 11. On January 1, 2011, Horse Corp. signed a three-year noncancelable purchase contract, which
allows Horse to purchase up to 500,000 units of a computer part annually from Dark Supply Co. at
P10 per unit and guarantees a minimum annual purchase of 100,000 units. During 2011, the part
unexpectedly became obsolete. Horse had 250,000 units of this inventory at December 31, 2011,

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 and believes these parts can be sold as scrap for P2 per unit. What amount of probable loss from
the purchase commitment should Horse report in its 2011 profit or loss?
a. P2,400,000 c. P1,600,000
b. P2,000,000 d. P 800,000

12. On August 15, 2012, a typhoon damaged a warehouse of Parlophone Merchandise Company. The
entire inventory and many accounting records stored in the warehouse were completely destroyed.
Although the inventory was not insured, a portion could be sold for scrap. Through the use of the
remaining records, the following data are assembled:
Inventory, January 1 P 375,000
Purchases, January 1-August 15 1,385,000
Cash sales, January 1-August 15 225,000
Collection of accounts, Jan. 1-Aug. 15 2,115,000
Accounts Receivable, January 1 175,000
Accounts Receivable, August 15 265,000
Salvage value of inventory 5,000

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Gross profit percentage on sales 32%

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Compute the inventory loss as a result of the typhoon.

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a. P107,600 c. P102,600
b. P104,200 d. P255,600

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13. A public limited company, Gatas Pure, produces milk on its farms. It produces 30% of the country’s
milk that it consumed. Gatas owns several farms and has a stock of 210,000 cows and 105,000 heifers.
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Additional information:
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At December 31, 2011, the herds are:

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210,000 cows (3 years old), all purchased on or before December 31, 2010
75,000 heifers, average age 1.5 years, purchased on July 1, 2011
30,000 heifers, average age 2 years, purchased on December 31, 2010
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No animals were born or sold in the year.

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The unit fair values less estimated costs to sell were

1 - year old animal at Dec. 31, 2011 P32
2 - year old animal at Dec. 31, 2011 45
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1.5 - year old animal at Dec. 31, 2011 36

3 - year old animal at Dec. 31, 2011 50
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1 - year old animal at Dec. 31, 2011

and July 1, 2011 30
2 - year old animal at January 1, 2011 40
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The increase in fair value of biological assets in 2011 due to physical change is
a. P1,500,000 c. P1,260,000
b. P1,470,000 d. P1,740,000

[Link] Corporation has the following transactions.

a. Plum sells P50,000 of goods to a customer, FOB shipping point on December 31, 2011.

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 b. Plum sells three pieces of equipment on a contract over a three year period. The sales price of
each piece of equipment is P100,000. Delivery of each piece of equipment on February 10 of
each year. In 2011, the customer paid a P200,000 down payment, and paid P50,000 per year
in 2012 and 2013. Collectibility is reasonably assured.
c. On June 1, 2011 Plum signs a contract for P200,000 for goods to be sold on account. Payment
is to be made in two installments of P100,000 each on December 1, 2012 and 2013. The
goods are delivered on October 10, 2011. Collection is reasonably assured, and the goods may
not be returned.
d. Plum sells goods to a customer on July 1, 2011, for P500,000. If the customer does not sell the
goods to retail customers by December 31, 2012, the goods can be returned to Plum. The
customer sells the goods to retail customers on October 1, 2012.
The total revenue to be recognized in 2011 is
a. P550,000 c. P350,000
b. P450,000 d. P150,000

Use the following information for the next two questions.

Maximilian uses the perpetual inventory system. Maximilian's inventory transactions for the month of

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August were as follows:

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Total cost

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No. Unit cost
01 Aug. Beg. inventory 20 P4.00 P80.00

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07 Aug.
10 Aug.
Purchases
Purchases rs e 10
20
4.20
4.30
42.00
86.00
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12 Aug. Sales 15 ? ?
16 Aug. Purchases 20 4.60 92
20 Aug. Sales 40 ? ?
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28 Aug. Sales returns 3 ? ?

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Using the information, assume that the Maximilian uses the FIFO cost flow method and that the sales
returns relate to the 20 August sales. The sales return should be costed back into inventory at what unit
cost?
a. P4.00 c. P4.07
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b. P4.30 d. P4.60
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Assuming that Maximilian uses the weighted average cost flow method, the 12 August sales should be
costed at what unit cost?
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a. P4.16 c. P4.07
b. P4.30 d. P4.60
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