INTERMEDIATE ACCOUNTING
CHAPTER 10: INVENTORIES
Problem 10-1 (IAA)
Amiable Company provided the following data at year-end:
Items counted in the bodega
4,000,000
Items included in the count specifically segregated per sales contract
100,000
Items in receiving department, returned by customer, in good condition
50,000
Items ordered and in the receiving department, invoice not received
400,000
Items ordered, invoice received but goods not received. Freight is paid by
seller.
300,000
Items shipped today, invoice mailed, FOB shipping point
250,000
Items shipped today, invoice mailed, FOB destination
250,000
Items currently being used for windows display
200,000
Items on counter for sale
800,000
Items in receiving department, refused by us because of damage
180,000
Items included in count, damaged and unsalable
50,000
Items in the shipping department
250,000
Required:
Compute the correct amount of inventory.
INTERMEDIATE ACCOUNTING
CHAPTER 10: INVENTORIES
Problem 10-2 (IAA)
Natalia Company provided the following information:
Materials
1,400,000
Advance for materials ordered
200,000
Goods in process
650,000
Unexpired insurance on inventories
60,000
Advertising catalogs and shipping cartons
150,000
Finished goods in factory
2,000,000
Finished goods in company-owned retail store, including 50% profit on
cost
750,000
Finished goods in hands of consignees including 40% profit on sales
400,000
Finished goods in transit to customers, shipped FOB destination at cost
250,000
Finished goods out on approval, at cost
100,000
Unsalable finished goods, at cost
50,000
Office supplies
40,000
Materials in transit shipped FOB shipping point, excluding freight of
P30,000
330,000
Goods held on consignment, at sales price, cost P150,000
200,000
Required:
Compute the correct amount of inventory.
INTERMEDIATE ACCOUNTING
CHAPTER 10: INVENTORIES
Problem 10-3 (IAA)
Luminous Company provided the following information at current year-end:
Finished goods in storeroom, at cost including overhead of P400,000
2,000,000
Finished goods in transit, including freight charge of P20,000, FOB
shipping point
250,000
Finished goods held by salesmen, at selling price, cost, P100,000
140,000
Goods in process, at cost of materials and direct labor
720,000
Materials
1,000,000
Materials in transit, FOB destination
50,000
Defective materials returned to suppliers for replacement
100,000
Shipping supplies
20,000
Gasoline and oil for testing finished goods
110,000
Machine lubricants
60,000
Required:
Compute cost of inventory at current year-end.
INTERMEDIATE ACCOUNTING
CHAPTER 10: INVENTORIES
Problem 10-9 (IFRS)
Corolla Company incurred the following costs:
Materials
700,000
Storage costs of finished goods
180,000
Delivery to customers
40,000
Irrecoverable purchase taxes
60,000
At what amount should the inventory be measured?
a. 880,000
b. 760,000
c. 980,000
d. 940,000
Problem 10-10 (AICPA Adapted)
At year-end, Kerr Company purchased goods costing P500,000 FOB destination. These
goods were received at year-end. The costs incurred in connection with the sale and
delivery of the goods were:
Packaging for shipment
10,000
Shipping
15,000
Special handling charges
25,000
What total cost should be included in inventory?
a.
b.
c.
d.
545,000
535,000
520,000
500,000
INTERMEDIATE ACCOUNTING
CHAPTER 10: INVENTORIES
Problem 10-4 (IAA)
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 P2,000 each.
Received 20 car seatcovers returned by a customer and gave credit. The goods
were in 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.
INTERMEDIATE ACCOUNTING
CHAPTER 10: INVENTORIES
Problem 10-5 (ACP)
Winter Company received quotations from two entities for an item of merchandise as
follows:
From Company A: List price P500,000, less 20-10-10, FOB shipping point, 2/10, n/30
From Company B: List price P500,000, less 35, FOB shipping point, 2/10, n/30.
REQUIRED:
For each quotation, compute the invoice amount and the amount to be paid by the
buyer within the discount period.
Problem 10-6 (IAA)
Autumn Company provided the following transactions for the current year, the first year
of operations.
1. Purchase of merchandise at an invoice price of P4,750,000 excluding freight.
Terms are 2/10, n/30.
2. Freight paid, P250,000. The freight is allocated to each purchase.
3. Cash payment on purchases, P3,717,000, of which P1,617,000 was paid within
the discount period.
4. It is expected that all discounts on unpaid accounts payable will be lost.
5. On December 31, one fifth of the merchandise remains on hand.
REQUIRED:
a. Prepare journal entries to record the transactions using gross method and net
method.
b. Compute inventory and cost of sales under each method.
INTERMEDIATE ACCOUNTING
CHAPTER 10: INVENTORIES
Problem 10-7 (IAA)
Fall Company began operations in the current year. The entity used perpetual inventory
system.
1. During the year, Fall Company purchased merchandise having a gross invoice
cost of P1,000,000. All purchases were made under the terms 2/10, n/30, FOB
destination.
2. Fall Company paid freight charge of P50,000.
3. During the year, Fall Company paid for 80% of the merchandise within the
discount period.
4. The remaining 20% was paid beyond the discount period.
5. Fall Company sold 70% of the merchandise it acquired for cash of P1,200,000.
The other 30% remained in inventory at year-end.
REQUIRED:
Prepare journal entries to record the transactions using gross method and net method.
Problem 10-9 (IFRS)
Seafood Company commenced operations during the year as large importer and
exporter of seafood. The imports were all from one country overseas. The entity
reported the following data:
Purchases during the year
12,000,000
Shipping costs from overseas
1,500,000
Shipping costs to export customers
1,000,000
Inventory at year-end
3,000,000
What amount of shipping costs should be included in the year-end inventory
valuation?
a. 250,000
b. 625,000
c. 375,000
d. 0
INTERMEDIATE ACCOUNTING
CHAPTER 10: INVENTORIES
Problem 10-12 (AICPA Adapted)
Stone Company had the following consignment transactions during the current year:
Inventory shipped on consignment to a consignee
600,000
Freight paid by Stone Company
50,000
Inventory received on consignment from a consignor
800,000
Freight paid by consignor
50,000
No sales of consigned goods were made during the current year.
What amount should be reported as consigned inventory at year-end?
a.
b.
c.
d.
700,000
650,000
850,000
600,000
Problem 10-13 (AICPA Method)
On October 1, 2021, Grimm Company consigned 40 freezers to Holden Company
costing P14,000 each for sale at P20,000 each and paid P16,000 in transportation
costs. On December 20, 2021, Holden Company reported the sale of 10 freezers and
remitted P170,000. The remittance was net of the agreed 15% commission.
What amount should be recorded as consignment sales revenue for 2021?
a.
b.
c.
d.
154,000
170,000
196,000
200,000
INTERMEDIATE ACCOUNTING
CHAPTER 10: INVENTORIES
Problem 10-4 (AICPA Adapted)
Gray Company regularly buys sweaters and is allowed a trade discount of 20% and
10%.
The entity made a purchase during the year and received an invoice with a list price of
P900,000, and payment terms of net 30 days.
What amount should be recorded as cost of the purchase?
a. 648,000
b. 630,000
c. 698,000
d. 680,000
Problem 10-15 (IFRS)
Brilliant Company has incurred the following costs during the current year:
Cost of purchases based on vendor’s invoices
5,000,000
Trade discounts on purchases already deducted from vendor’s invoices
500,000
Import duties
400,000
Freight and insurance on purchases
1,000,000
Other handling costs relating to imports
100,000
Brokerage commission paid to agents for arranging imports
200,000
Salaries of accounting department
600,000
Sales commission paid to sales agents
300,000
After-sales warranty costs
250,000
What amount should be recorded as total cost of purchases?
a. 5,000,000
b. 6,100,000
c. 6,700,000
d. 6,500,000
INTERMEDIATE ACCOUNTING
CHAPTER 10: INVENTORIES
Problem 11-1 (IAA)
Bronze Company had the following transactions relating to inventory during January:
Jan. 1 Balance on hand
5 Purchase
10 Sale
15 Sale
20 Purchase
25 Purchase
31 Sale
Units
6,000
2,000
4,000
1,000
2,500
2,000
3,000
Unit Cost
150
200
300
400
Determine the ending inventory under each of the following costing methods.
1. FIFO
2. Weighted average method – periodic
INTERMEDIATE ACCOUNTING
CHAPTER 10: INVENTORIES
Problem 11-2 (ACP)
Furlough Company began operations at the beginning of current year with 10,000 units
of merchandise with unit cost of P80. Purchase for the current year follow:
Lot No.
1
2
3
4
5
Units
2,000
8,000
6,000
9,500
14,500
Unit Cost
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).
INTERMEDIATE ACCOUNTING
CHAPTER 10: INVENTORIES
Problem 11-3 (IAA)
Emcee Company provided the following information relating to inventory for the month
of December:
Dec. 1 Beginning
7 Purchase
12 Sale
17 Purchase
22 Purchase
28 Sale
Units
10,000
30,000
20,000
60,000
20,000
70,000
Unit Cost
52
50
Unit Selling Price
90
45
43
90
Required:
Assuming the entity used the periodic system, compute the December 31 inventory and
cost of goods sold under:
1. FIFO
2. Weighted average