Intermediate 1A:
Problem Compilation
Submitted by: Barrios, Patricia Nicole C.
BSA 1-7
Submitted to: Miss Karen Umali
07 May 2019
Chapter 10:
Inventories
PROBLEM 10-4
Summer Company is a wholesaler of car seatcovers. At the beginning of the current
year, the entity’s inventory consisted of 90 car seatcovers priced at P1,000 each. During
the current year, the following events occurred:
1.
2.
3.
4.
5.
Purchased 800 car seatcovers on account at P1,000 each.
Returned 50 defective car seatcovers to supplier and received credit.
Paid 600 of the car seatcovers purchased.
Sold 790 car seatcovers at P2000 each.
Received 20 car seatcovers returned by a customer and gave credit. The goods
were excellent condition.
6. Received cash for 680 of the car seatcovers sold.
7. Physical count at year-end revealed 60 units on hand.
REQUIRED:
a. Prepare journal entries, including adjustments to record the above transactions
assuming the company uses periodic system and perpetual system.
b. Determine the cost of sales under each inventory system.
ANSWER:
REQUIREMENT A.
PERIODIC SYSTEM
PERPETUAL SYSTEM
1.Purchases
800,000
1.Merchandise Inventory
800,000
Accounts Payable
Accounts Payable
800,000
800,000
2.Accounts Payable
50,000
2.Accounts Payable
50,000
Merchandise Inventory
50,000
Purchase Returns
50,000
3.Accounts Payable
600,000
Cash
600,000
3.Accounts Payable
600,000
Cash 4.Accounts Receivable
1,580,000
600,000
Sales
1,580,000
4.Accounts Receivable
1,580,000
Sales
Cost of Sales
Merchandise Inventory
790,000
790,000
1,580,000
5.Sales Return
Accounts
40,000
Receivable
40,000
6.Cash
1,360,000
5.Sales Return
Accounts Receivable
40,000
40,000
Merchandise Inventory
Cost of Sales
20,000
20,000
Accounts
1,360,000
7.Inventory – Dec. 31
Income
60,000
Receivable 6.Cash
Accounts Receivable
1,360,000
1,360,000
60,000
7.Inventory Shortage
10,000
Summary
Merchandise Inventory
10,000
Merchandise inventory per book P 70,000
Physical count
(60,000)
Shortage
P 10,000
REQUIREMENT B.
PERIODIC SYSTEM
Inventory – January
Purchases
Purchase Returns
Goods available for sale
Less: Inventory – Dec. 31
Cost of Sales
P
800,000
(50,000)
90,000
750,000
840,000
(60,000)
P 780,000
PERPETUAL SYSTEM
Cost of Sales recorded
Inventory shortage
P 770,000
10,000
Adjusted cost of sales
P 780,000
(790,000 – 20,000)
PROBLEM 10-8
Myriad Company revealed the following purchase transactions occurred during the last
few days of the fiscal year, which ends December 31, and in the first few days after that
date.
1. An invoice for P50,000, FOB shipping point, was received and recorded on
December 27. The shipment was received in satisfactory condition on January 2.
The merchandise was not included in the inventory.
2. An invoice for P75,000, FOB destination, was received and recorded on
December 28. The shipment was received in satisfactory condition on January 3.
The merchandise was not included in the inventory.
3. An invoice for P30,000, FOB shipping point, was received and recorded on
January 4. The invoice shows that the goods had been shipped on December 28
and the receiving report indicates that the goods had been received on January
4. The merchandise was excluded from inventory.
4. An invoice for P90,000, FOB shipping point, was received on December 15. The
receiving report indicates that the goods had been received on December 18 but
across the face of the report is the notation "merchandise not of the same quality
as ordered - returned for credit, December 19". The merchandise was included in
the inventory.
5. An invoice for P140,000 FOB destination, was received and recorded on January
4. The receiving report indicates that the goods were received on December 29.
The merchandise was included in the inventory.
REQUIRED:
Prepare the adjustments on Dec. 31,2012. Books are still open.
ANSWER:
1. Inventory
Income Summary
50,000
2. Accounts Payable
Purchases
75,000
3. Purchases
Accounts Payable
30,000
Inventory
Income Summary
30,000
4. Income Summary
Inventory
5. Purchases
Accounts Payable
50,000
75,000
30,000
30,000
90,000
90,000
140,000
140,000
PROBLEM 10-9
Hero Company reported inventory on December 31, 2019 at P6,000,000 based on a
physical count of goods priced at cost, and before any necessary year-end adjustments
relating to the following:

Included in the physical count were goods billed to a customer FOB shipping
point on December 31, 2019.
These goods had a cost of P125,000 and were picked up by the carrier on
January 10, 2020.

Goods shipped FOB shipping point on December 28, 2019 from a vendor to Hero
Company were received on January 4, 2020. The invoice cost was P300,000.
What amount should be reported as inventory on December 31, 2019?
a.
b.
c.
d.
5,875,000
6,000,000
6,175,000
6,300,000
SOLUTION:
Physical Count
Goods shipped FOB shipping point to Hero Company
P 6,000,000
300,000
P 6,300,000
The goods costing P125,000 are properly included in the December 31, 2011
physical count because they are shipped FOB shipping point only on January 7, 2012
(picked up by common carrier.)
PROBLEM 10-10
Empty Company reported inventory on December 31, 2019 at P2,500,000 based on
physical count priced at cost and before any necessary adjustment for the following:

Merchandise costing P100,000, shipped FOB shipping point from a vendor on
December 30, 2019 was received and recorded on January 5, 2020.

Goods in the shipping area were excluded from inventory although shipment was
not made until January 5, 2020.
The goods billed to the customer FOB shipping point on December 30, 2019 had
a cost of P400,000.
What amount should be reported as inventory on December 31, 2019?
a.
b.
c.
d.
2,500,000
2,600,000
2,900,000
3,000.000
SOLUTION:
Physical Count – December 31, 2019
FOB Shipping Point – December 30, 2019
Billed to customer FOB Shipping Point – December 30, 2019
Adjusted Inventory
P 2,500,000
100,000
400,000
P 3,000,000
PROBLEM 10-14
Kew Company reported accounts payable on December 31, 2019 at P2,200,000 before
considering the following data:

Goods shipped to Kew FOB shipping point on December 22, 2019 were lost in
transit. The invoice cost of P40,000 was not recorded by Kew.
On January 7, 2020, Kew filed a P40,000 claim against the common carrier.

On December 27, 2019, a vendor authorized Kew to return for full credit goods
shipped and billed at P70,000 on December 15, 2019.
The returned goods were shipped by Kew on December 28, 2019. A P70,000
credit memo was received and recorded by Kew on January 5, 2020.

On December 31, 2019, Kew has a P500,000 debit balance in accounts payable
to Ross, a supplier, resulting from a P500,000 advance payment for goods to be
manufactured.
What amount should be reported as accounts payable on December 31, 2019?
a. 2,170,000
b. 2,680,000
c. 2,730,000
d. 2,670,000
SOLUTION:
Accounts payable per book
Goods shipped FOB shipping point lost in transit
Purchase returns
Advance payment erroneously debited to accounts payable
Adjusted accounts payable
P 2,200,000
40,000
(70,000)
500,000
P 2,670,000
Kew Company shall suffer the loss of the goods in transit because the goods are
shipped FOB shipping point. Appropriately, Kew Company must file a claim
against the common carrier.
PROBLEM 10-16
A physical count on December 31, 2019 revealed that Joyous Company had inventory
with a cost of P4,410,000.
The following items were excluded from this amount:

Merchandise of P610,000 is held by Joyous on consignment.

Merchandise costing P380,000 was shipped by Joyous FOB destination to a
customer on December 31, 2019.
The customer was expected to receive the goods on January 5, 2020.

Merchandise costing P460,000 was shipped by Joyous FOB shipping point to a
customer on December 29, 2019.
The customer was expected to receive the goods on January 10, 2020.

Merchandise costing P830,000 shipped by a vendor FOB destination on
December 31, 2019 was received by Joyous on January 15, 2020.

Merchandise costing P510,000 purchased FOB shipping point was shipped by
the supplier on December 31, 2019 and received by Joyous on January 5, 2020.
What amount of inventory should be reported on December 31, 2019?
a. 5,300,000
b. 4,690,000
c. 3,800,000
d. 4,920,000
SOLUTION:
Physical count
Goods sold in transit, FOB destination
Goods purchased in transit, FOB shipping point
Adjusted inventory
P 4,410,000
380,000
510,000
P 5,300,000
PROBLEM 10-17
Audacity Company counted the ending inventory on December 31, 2019 and reported
the amount of P2,000,000 before any corrections.
None of the following items were included when the total amount of the ending inventory
was computed:

Goods located in the entity’s warehouse are
on consignment from another entity
150,000

Goods sold by the entity and shipped FOB
destination were in transit on December 31,
2019 and received by the customer on
January 2, 2020.
200,000

Goods purchased by the entity and shipped
FOB shipping point were in transit on December
31, 2019 and received by the entity on
January 2, 2020.
300,000

Goods sold by the entity and shipped FOB
400,000
shipping point were in transit on December
31, 2019 and received by the customer on
January 2, 2020.
What amount of inventory should be reported on December 31, 2019?
a.
b.
c.
d.
2,500,000
2,350,000
2,900,000
2,750,000
SOLUTION:
Reported inventory
Goods sold in transit, FOB destination
Goods purchased in transit, FOB shipping point
Correct amount of inventory
P 2,000,000
200,000
300,000
P 2,500,000
PROBLEM 10-24
Fancy Company is a wholesale distributor of automotive replacement parts. The entity
revealed the following initial amounts on December 31, 2019.
Inventory at December 31 based on physical count
Accounts Payable
Sales
1,250,000
1,000,000
9,000,000
ADDITIONAL INFORMATION
A. Parts held on consignment from another entity to Fancy Company, the
consignee, amounting to P165,000, were included in the physical count on
December 31, 2019, and in accounts payable at December 31, 2019.
B. P22,000 of parts, which were purchased and paid for in December 2019, were
sold in the last week of 2019 and appropriately recorded as sales of P28,000.
The parts were included in the physical count on December 31, 2019, because
the parts were on the loading dock waiting to be picked up by customers.
C. Parts in transit on December 31, 2019 to customer, shipped FOB shipping point,
on December 28, 2019, amounted to P34,000.
The customers received the parts on January 6, 2020. Sales of P40,000 to the
customers for the parts were recorded by Fancy Company on January 2, 2020.
D. Retailers were holding P210,000 at cost and P250,000 at retail, of goods on
consignment from Fancy Company, at their stores on December 31, 2019.
E. Goods were in transit from a vendor to Fancy Company on December 31, 2019.
The cost of the goods was P25,000.
The goods were shipped FOB shipping point on December 29, 2019.
1. What is the correct amount of inventory?
a.
b.
c.
d.
1,300,000
1,320,000
1,334,000
1,090,000
2. What is the correct amount of accounts payable?
a.
b.
c.
d.
835,000
960,000
975,000
860,000
3. What is the correct amount of sales?
a.
b.
c.
d.
9,250,000
9,290,000
9,040,000
9,000,000
SOLUTION:
Inventory
Unadjusted
A
B
C
D
E
Adjusted
Accounts Payable
Sales
1,250,000
1,000,000
9,000,000
(165,000)
(165,000)
(20,000)
40,000
210,000
25,000
25,000
__________________________________________
1,300,000
860,000
9,040,000
Chapter 11:
Inventory Cost Flow
PROBLEM 11-1
Bronze Company had the following transactions relating to inventory during January:
January 1
5
10
15
20
25
31
Balance on hand
Purchase
Sale
Sale
Purchase
Purchase
Sale
UNITS
UNIT COST
6,000
2,000
4,000
1,000
2,500
2,000
3,000
150
200
300
400
Determine the ending inventory under each of the following costing methods.
1. FIFO
2. Weighted average method – periodic
ANSWER:
REQUIREMENT 1
January 1 Balance on hand
5 Purchases
10 Sale
15 Sale
20 Purchases
25 Purchases
31 Sale
Total Units
Total Sales
Ending Inventory
January 20
January 25
Units
Unit Cost
Total Cost
Sales
6,000
2,000
2,500
2,000
12,500
150
200
300
400
-
900,000
400,000
750,000
800,000
2,850,000
4,000
1,000
3,000
8,000
P 12,500
(8,000)
P 4,500
Units
2,500
2,000
4,500
Unit Cost
300
400
Total Cost
750,000
800,000
1,550,000
REQUIREMENT 2
Weighted Average – Periodic
Units
January 1 Balance on hand
5 Purchases
20 Purchases
25 Purchases
Total Goods Available for Sale
6,000
2,000
2,500
2,000
12,500
Unit Cost
Total Cost
150
200
300
400
900,000
400,000
750,000
800,000
2,850,000
Weighted Average Unit Cost
(2,850,000 / 12,500)
Inventory Cost
(4,500 x 228)
228
P 1,026,000
PROBLEM 11-2
Furlough Company began operations at the beginning of current year with 10,000 units
of merchandise with unit cost of P80. Purchases for the current year follow:
Lot No.
Units
Unit Cost
1
2
3
4
5
2,000
8,000
6,000
9,500
14,500
100
110
120
100
90
The physical inventory revealed 15,000 units on hand at year-end.
REQUIRED:
Compute inventory cost at year-end and cost of goods sold for the year following each
method listed below.
1. FIFO – periodic
2. Weighted average – periodic
3. Specific identification (assuming the inventory comes from Lot 3, 6,000 units, and
Lot 4, 9,000 units).
ANSWER:
REQUIREMENT 1
Units
Unit Cost
Beginning Inventory 10,000
1 Purchases
2,000
2 Purchases
8,000
3 Purchases
6,000
4 Purchases
9,500
5 Purchases
14,500
Sales
50,000
Total Units
Total Sales
Ending Inventory
Total Cost
80
100
110
120
100
90
-
800,000
200,000
880,000
720,000
950,000
1,305,000
4,855,000
Sales in Units
15,000
15,000
P 50,000
(15,000)
P 35,000
FIFO – Periodic
4 Purchases
5 Purchases
Units
Unit Cost
Total Cost
20,500
14,500
35,000
100
90
2,050,000
1,305,000
3,355,000
Cost of Goods Sold
Inventory Beginning
Add: Purchases
P
800,000
4,055,000
__________
Goods Available for Sale
Less: Inventory End
4,855,000
(3,355,000)
__________
Cost of Goods Sold
P 1,500,000
REQUIREMENT 2
Weighted Average – Periodic
Units
Beginning Inventory 10,000
1 Purchases
2,000
2 Purchases
8,000
3 Purchases
6,000
4 Purchases
9,500
5 Purchases
14,500
Sales
50,000
Unit Cost
Total Cost
80
100
110
120
100
90
-
800,000
200,000
880,000
720,000
950,000
1,305,000
4,855,000
Weighted Average Unit Cost
(4,855,000 / 50,000)
Inventory Cost
(35,000 x 97.1)
Cost of Goods Sold
Inventory Beginning
Add: Purchases
P
800,000
4,055,000
__________
Goods Available for Sale
Less: Inventory End
4,855,000
(3,398,000)
__________
Cost of Goods Sold
P 1,456,500
REQUIREMENT 3
Lot 3 – 6,000 x 120 =
Lot 4 – 9,000 x 100 =
Sales in Units
720,000
900,000
P 1,620,000
97.1
P 3,398,500
15,000
15,000
PROBLEM 11-4
Gross Company provided the following purchases and sales for the month of March:
Units
March
March
1
6
14
25
9
31
Beginning
Purchase
Purchase
Purchase
Sale
Sale
Unit Cost
1,000
3,000
6,000
4,000
2,000
8,000
270
250
280
210
REQUIRED:
Assuming the entity used perpetual system, compute ending inventory and cost of sales
under:
1. FIFO
2. Moving average
REQUIREMENT 1
(FIFO - PERPETUAL)
Purchases
Date Units Unit Cost Total Cost
Mar.1
6 3,000
250
750,000
9
14 6,000
25 4,000
280
210
Balance
1,000
1,000
270
250
270,000
250,000
2,000
6,000
250
280
500,000
1,680,000
1,680,000
840,000
31
13,000
Sales
Units Unit Cost Total Cost
3,270,000
Units Unit Cost Total Cost
1,000
270
270,000
1,000
270
270,000
3,000
250
750,000
2,000
2,000
6,000
4,000
250
250
280
210
500,000
500,000
1,680,000
840,000
4,000
4,000
210
840,000
840,000
REQUIREMENT 2
(MOVING AVERAGE)
Date
Units
Unit Cost
Total Cost
Mar. 1 Beg. Balance
1,000
270
270,000
6 Purchase
3,000
250
750,000
4,000
255
1,020,000
(2,000)
260
(520,000)
2,000
250
500,000
6,000
280
1,680,000
8,000
272.5
2,180,000
4,000
210
Balance
9 Sale
Balance
14 Purchase
Balance
25 Purchase
Balance
12,000
251.67
31 Sale
BALANCE
(8,000)
4,000
272. 5
210
840,000
3,020,000
(2,180,000)
840,000
PROBLEM 11-12
Harlot Company began operations on January 1, 2019 and adopted the weighted
average method of inventory pricing.
2019
2020
2021
Sales
Cost of sales
3,000,000
1,500,000
4,000,000
2,000,000
4,800,000
2,400,000
Gross income
Expenses
1,500,000
800,000
2,000,000
900,000
2,400,000
1,000,000
700,000
1,100,000
1,400,000
Net income
Comparative inventory amount
Weighted Average
December 31, 2019
December 31, 2020
December 31, 2021
270,000
300,000
380,000
FIFO
420,000
500,000
650,000
REQUIRED:
Revise the condensed comparative income statement, assuming the entity used the
FIFO method.
ANSWER:
Cost of Sales – Average
2019
2020
2021
1,500,000
2,000,000
2,400,000
Understatement of
Ending Inventory
2019
2020
2021
Sales
Cost of Sales – FIFO
Gross Income
Operating Expenses
Operating Income
(150,000)
150,000
(200,000)
200,000
(270,000)
______________________________________
1,350,000
1,950,000
2,330,000
3,000,000
4,000,000
4,800,000
1,350,000
1,950,000
2,300,000
_______________________________________
17,650,000
2,050,000
2,470,000
(800,000)
(900,000)
(1,000,000)
_______________________________________
850,000
1,150,000
1,470,000
Proof
Net Income – Average
7,000,000
1,100,000
1,400,000
150,000
-
(150,000)
200,000
-
(200,000)
270,000
Understatement of Ending
Inventory
2019
2020
2021
_______________________________________
850,000
1,150,000
1,470,000
Net Income – FIFO
PROBLEM 11-13
Rocky Company provided the following inventory data for January:
Units
January
1
9
29
Balance
Purchase
Purchase
Unit Cost
500
1,500
500
500
540
600
The entity used the periodic system and determined the inventory on January 31 at 750
units.
REQUIRED:
Compute the cost of ending inventory under FIFO and determine the cost of goods sold
under average method.
ANSWER:
Units
January 1 Balance
9 Purchase
29 Purchase
31 Sales
Total Units
Total Sales
Ending Inventory
500
1,500
500
2,500
Unit cost
500
540
600
P 2,500
(750)
P 1,750
Total Cost
250,000
810,000
300,000
1,360,000
Sales in Unit
750
750
FIFO – Periodic
Units
January 9
January 29
Unit Cost
1,250
500
1,750
540
600
Weighted Average Unit Cost (1,360,000 / 2,500)
Inventory Cost (1,750 x 544)
Total Cost
675,000
300,000
975,000
544
P 952,000
Cost of Goods Sold
Inventory Beginning
Add: Purchases
Goods Available for Sale
Less: Inventory End
Cost of Goods Sold
P
250,000
1,110,000
__________
1,360,000
(952,000)
__________
P 408,000
PROBLEM 11-14
Landmark Company purchased a tract of unimproved land for P26,850,000. The land
was improved and subdivided into residential lots at a cost of P43,500,000.
These lots were all of the same size but owing to differences in location were offered for
sale at different prices as follows:
Group
per lot
1
2
3
No. of lots
20
10
10
Lots unsold at the end of the year are:
Group 1
Group 2
Group 3
5 lots
4 lots
3 lots
Sales price
3,000,000
2,500,000
2,000,000
REQUIRED:
Compute the cost of unsold lots at the end of the year.
ANSWER:
Group
1
2
3
Sales Price
Cost
20 x 3,000,000
60,000,000
60/105
40,200,000
10 x 2,500,000
25,000,000
25/105
16,750,000
10 x 2,000,000
20,000,000
20/105
13,400,000
__________________________________________________________
105,000,000
70,350,000
Group
1
2
3
Fraction
Cost per lot
Unsold
Cost
40,200,000 / 2
2,010,000
5
10,050,000
16,750,000 / 10
1,675,000
4
6,700,000
13,400,000 / 10
1,340,000
3
4,020,000
__________________________________________________________
20,770,000
PROBLEM 11-16
Massive Company provided the following information for the current year:
January
April
October
1
3
1
Inventory on hand
Purchase
Purchase
Units
Unit cost
Total Cost
200
300
500
1,500
1,750
2,000
300,000
525,000
1,000,000
The entity sold 400 units on June 25 and 400 on December 10. What is the weighted
average cost of the inventory at the year-end?
a. 350,000
b. 400,000
c. 730,000
d. 365,000
SOLUTION:
Units
January
1
April
3
October
3
June
25
December 31
Unit Cost
Total Cost
Sales
Inventory on hand
200
1,500
300,000
Purchases
300
1,750
525,000
Purchases
500
2,000
1,000,000
Sale
400
Sale
400
____________________________________________
1,000
1,825,000
800
Total Units
Total Sales
Ending Inventory
P 1,000
(800)
P 200
Weighted Average Unit Cost
(1,825,000 / 1,000)
Inventory Cost
(200 x 1,825)
1,825
P 365,000
PROBLEM 11-17
Jailbird Company provided the following data about the inventory for the month of
January:
January
1
5
10
15
15
25
26
31
Beginning
Purchase
Sale
Purchase
Purchase return
Sale
Sale return
Purchase
Units
Unit Cost
Total Cost
16,000
4,000
15,000
20,000
1,000
8,000
4,000
30,000
140
150
2,240,000
600,000
160
160
3,200,000
160,000
150
4,500,000
What is the moving average cost of the inventory on January 31?
a.
b.
c.
d.
7,625,000
7,500,000
7,690,000
7,530,000
SOLUTION:
Date
Unit Cost
Total Cost
16,000
140
2,240,000
4,000
150
600,000
Balance
20,000
142
2,840,000
10 Sale
(15,000)
142
(2,130,000)
Balance
5,000
142
710,000
15 Purchase
20,000
160
3,200,000
Balance
25,000
156.4
3,910,000
16 Purchase Return
(1,000)
160
(160,000)
Balance
24,000
156.25
3,750,000
20 Sale
(8,000)
156.25
1,250,000
Balance
16,000
156.25
2,500,000
4,000
156.25
625,000
Balance
20,000
156.25
3,125,000
31 Purchase
30,000
150
4,500,000
Balance
50,000
152.5
7,625,000
Jan. 1 Beg. Balance
5 Purchase
26 Sales Return
Units