HANDOUT FOR IAS 2 INVENTORY Choose “A” if the inventory referred to in the situation SHOULD BE included in the inventory on December 31, 2020. Otherwise, choose “B”. 1. Purchased merchandise from the Seller on December 21, 2020. The merchandise was shipped FOB Seller on December 30, 2020 and arrived in buyer’s premises on January 5, 2021. 2. Sold to the buyer on December 30, 2020, FOB Destination. These inventories were not included in the inventory count because on December 31, 2020, when physical count was made, the inventories were already shipped. Goods were still in transit as of December 31, 2021. 3. On December 31, 2020, received goods from supplier. The invoice depicted that the goods were shipped FOB Destination on December 30, 2021. These goods were included in the seller’s inventory. 4. Goods were in transit to buyer on December 31, 2020. These good were shipped on December 28, 2020 and were expected to be delivered to the buyer on January 2, 2021. Terms were FOB Shipping Point, 2/15, 1/10, n/30. 5. Goods in a box labeled “Please accept for credit” was received from a customer. The goods were excluded from inventory on December 30, 2020 although when inspected, none of the goods seemed damaged but returned because it did not meet the customer’s specifications. 6. Merchandise was sold and delivered to the customer on December 29, 2020. The goods were sold with a repurchase agreement that requires the seller to buy back the inventory on January 3, 2021. These goods were included in the buyer’s inventory. 7. Included in the inventory was a box of goods on December 30, 2020, when the count was conducted. The box, containing special orders, is due for delivery on January 2, 2021 to a one-time customer who offered to buy special order products at a very high price. The goods were actually delivered on January 5, 2021. 8. Warehouse where completed goods were stored pays a rent of P10,000 per month. The rent for the month of December 2020 is not included in the cost of inventory. 9. Merchandise held on consignment were included in the inventory. 10. Goods sold with a right to return granted to buyer. The return is predictable. Select the letter which corresponds to the best answer. Use CAPITAL LETTERS only. 11. Which of the following costs should not be included (considered) in the computation of cost of purchased inventory? a. Freight in b. Rebates c. VAT and other purchase taxes d. Handling costs 12. When inventory declines in value below original cost, what is the maximum amount that the inventory can be valued at? a. Sales price b. Net realizable value c. Historical cost d. Replacement Cost 13. Which of the following is not true about accounting for inventory under PAS 2? a. FIFO is allowed b. Interest cost may be capitalized if there is a lengthy production period to prepare goods for sale c. The weighted-average method is acceptable d. Inventories are always valued at net realizable value PROBLEM 1: Dalisay Company’s November 30 inventory balance were 250,000 units. During December, there were sales totaling 250,000 units which includes 80,000 consignment to Jordas Store, of which 40% of which were sold during December. A review of the December purchases showed the following: Invoice date Shipment date Date goods were received Units Jan. 2 Jan. 2 Jan. 3 Dec. 20 Jan. 5 Jan. 7 Dec. 28 Dec. 27 Dec. 30 Dec. 29 Jan. 4 Jan 5 Dec. 31 Jan. 2 Jan. 7 Jan. 2 Jan. 6 Jan. 7 10,400 17,200 15,800 16,000 9,200 7,000 Terms FOB, Destination FOB, Destination FOB, Shipping Point FOB, Shipping Point FOB, Destination FOB, Destination Dalisay Co. conducted a physical inventory on December 31, 2020. Determine the following: 1. Number of units purchased during December. 2. Number of units sold during December. 3. Number of units to be reported as December 31 inventory. PROBLEM 2. On December 31, 2020, the balance of Panganiban’s inventory account was P251,000, while its Allowance for Inventory Writedown account has a balance of P16,000. On December 31, 2021, the following inventory details were shown: Product U S T F Cost P 44,500 47,000 62,500 97,000 Replacement Cost P 43,000 46,000 67,500 57,000 Sales Price P 45,750 45,000 69,000 8,000 Net Realizable Value P 40,500 48,500 55,500 98,500 Normal Profit P 3,200 3,720 5,805 10,250 Determine the following: 4. Using allowance method, the required balance of the Allowance to Reduce Inventory to NRV (or Allowance on Inventory Writedown) account on December 31, 2021. 5. The amount of inventory to be shown in the December 31, 2021 Statement of Financial Position. PROBLEM 3. In 2020, Dimayuga Company showed the following information with regards to its inventory: January 1 January 31 April 1 July 31 October 1 December 31 Balance forwarded Sale Purchase Sale Purchase Sale Total Cost P 400,000 750,000 1,500,000 Units 10,000 5,000 15,000 18,000 25,000 12,000 Determine the cost of ending inventory, if Dimayuga uses 6. First-in, First-Out, periodic 7. Periodic average 8. Perpetual average Determine the cost of goods sold, if Dimayuga uses 9. First-in, First-Out, periodic 10. Periodic average 11. Perpetual average PROBLEM 4. Fahikulay Company, using the direct method of accounting for inventory writedown, presented the following income statements for the year ended December 31, 2020 and 2019. 2020 2019 Sales Less: Cost of Sales 6,880,000 6,235,000 Beginning Inventory 1,032,000 645,000 Add: Net Purchases Total Goods Available for Sales 3,010,000 2,580,000 4,042,000 3,225,000 Less: Ending Inventory 1,290,000 2,752,000 1,032,000 2,193,000 Gross Profit 4,128,000 4,042,000 Less: Expenses 1,612,500 1,376,000 Profit / Loss 2,515,500 2,666,000 The cost of inventories for the years ended December 31, 2018, 2019 and 2020 were P817,000, P1,075,000 and P1,419,000. Using Allowance Method, determine the following: 12. The loss from decline in NRV of inventory for the year ended December 31, 2018. 13. The recovery in NRV of inventory for the year ended December 31, 2019. 14. The required Allowance to Reduce Inventory to NRV (or Allowance on Inventory Writedown) account on December 31, 2020. 15. The income before adjustment for any loss or recovery on inventory writedown using the Allowance Method for the year ended December 31, 2019. 16. The income before adjustment for any loss or recovery on inventory writedown using the Allowance Method for the year ended December 31, 2020.
