Chapter 7
Inventories
QUIZ
1. For government entities, inventories are assets (choose the incorrect one)
a. Held for sale, consumption, distribution, or exchange.
b. In the process of production for sale, consumption, distribution or exchange.
c. In the form of materials or supplies to be consumed in the production process or in the
rendering of services.
d. Used in the production of goods.
D – PPE, e.g., factory equipment used in the production of goods.
2. Entity A, a government entity, purchases office supplies. Entity A would most likely record the
purchase
a. by debiting the Purchases account
b. as Inventory Held for Consumption
c. as Inventory Held for Distribution
d. by debiting the Office Supplies Expense account
3. Who owns the goods in transit under FOB shipping point?
a. buyer
b. seller
c. either a or b
d. none
4. Which of the following documents is prepared when issuing semi-expendable property to endusers?
a. Requisition and Issue Slip (RIS)
b. Inventory Custodian Slip
c. Supplies Ledger Card (SLC)
d. Waste Materials Report
5. The carrying amount of inventory is not recognized as expense in this type of event or
transaction.
a. The inventory is sold.
b. The inventory is used in the production of another asset.
c. The inventory is consumed by end users in providing service.
d. The inventory is written-off.
6. Which of the following is subsequently measured at the lower of cost and current replacement
cost?
a. Inventories held for sale
b. Inventories held for distribution
c. Inventories that are undergoing manufacturing process for completion as finished goods for
sale.
d. None of these.
7. The supply or property office of a government entity uses this to record and monitor the
movements and balances of inventories.
a. Stock Card
b. Inventory Listing
c. Stock Ledger Card
d. Registry of Inventory
8. The following information is available from Entity A’s (a government entity) accounting records:
Purchases ............................................
₱530,000
Purchase discounts ...................................
10,000
Beginning
160,000
inventory ..................................
Ending inventory .....................................
215,000
Freight-out ..........................................
40,000
Entity A’s cost of sales is
a. 465,000
b. 475,000
c. 505,000
d. 585,000
A
Solution:
beg.
Purchase
s
Inventory
160,000
10,000
465,00
530,000
0
215,000
Purchase Disc.
COGS
(squeeze)
end.
9. Entity A, a government entity and a manufacturer of military equipment, had inventories at the
beginning and end of its current year as follows:
Beginnin
End
g
Raw materials
11,000
15,000
Work
in
20,000
24,000
process
Finished goods
12,500
9,000
During the year, the following costs and expenses were incurred:
Raw materials purchased
Direct labor cost
Indirect factory labor
Taxes and depreciation on factory building
Taxes and depreciation on sales room and office
Sales salaries
Office salaries
Utilities (60% applicable to factory, 20% to sales room, and 20% to office)
150,000
60,000
30,000
10,000
7,500
20,000
12,000
25,000
Entity A's cost of sales for the year is
a. 257,000
b. 260,500
c. 261,000
d. 269,500
B
Solution:
beg.
Purchases
Raw materials
11,000
150,000
146,000
15,000
beg.
Direct materials
Direct labor
Factory overhead:
Indirect factory labor
Taxes and depn. - factory bldg.
Utilities (60% x 25,000)
beg.
COGM
DM
end.
WIP
20,000
146,000
60,000
30,000
10,000
15,000
257,000
COGM
24,000
end.
Finished goods
12,500
257,000
260,500
9,000
COGS
end.
10. Entity A, a government entity, is a wholesaler of Product A, a non-unique good. The activity for
Product A during July is shown below:
Balance/
Date
Transaction
Units
Cost
July
Inventory
2,000
₱36.00
1
7
12
21
22
29
Purchase
Sales
Purchase
Sales
Purchase
3,000
3,600
5,000
3,800
1,600
37.00
37.88
38.11
How much is the ending inventory on July 31?
a. 153,400
b. 156,912
c. 158,736
d. Answer cannot be determined due to insufficient information
C
Solution:
Date
Transaction
1Inventory
Jul
7 Purchase
Units
Cost
Total cost
2,000
36.00
72,000
3,000
37.00
111,000
Total
5,000
12
Sales
(3,600)
21
Purchase
5,000
36.60
37.88
Total
6,400
37.60
22
Sales
(3,800)
29
Purchase
Ending
inventory
1,600
4,200
36.60
37.60
38.11
183,000
(131,760)
189,400
240,640
(142,880)
60,976
158,736
“So do not fear, for I am with you; do not be dismayed, for I am your God. I will strengthen you and help you;
I will uphold you with my righteous right hand.”
(Isaiah 41:10)
- END -