CHAPTER 7: INVENTORIES
PROBLEM 1: TRUE OR FALSE
TRUE 1. The definition of inventories under PAS 2 states three types of inventories.
FALSE
2. Goods in transit purchased FOB destination are included in the inventories of the
buyer.
FALSE
3. Consigned goods remain in the inventories of the consignee until the goods are
sold to end customers.
FALSE
4. An increase in inventory always has corresponding increase in accounts payable.
TRUE 5. At the year-end, an entity’s inventory costing ₱80,000 has a net realizable value of
₱70,000. According to PAS 2, the entity should report the inventory at ₱70,000.
Use the following information for the next five questions:
Big Co. sells apples. At the start of the period, Big Co.’s inventory consisted of one (1) red
apple with a carrying amount of ₱2. During the period, Big Co acquired one (1) green apple
for ₱3 and one (1) blue apple ₱4. Big Co. sold the green apple during the period.
FALSE 6. Under the FIFO cost formula, Big Co.’s ending inventory is ₱6.
TRUE 7. Under the FIFO cost formula, Big Co.’s cost of goods sold for the period is ₱3.
FALSE 8. Under the Average cost formula, Big Co.’s ending inventory is ₱3.
TRUE 9. Under the Average cost formula, Big Co.’s cost of goods sold is ₱3.
TRUE 10. Under the Specific identification cost formula, Big Co.’s cost of goods sold is ₱3.
PROBLEM 2: MULTIPLE CHOICE-THEORY
1. Inventories are assets (choose the incorrect one)
a. Held for sale in the ordinary course of business.
b. In the process of production for sale.
c. In the form of materials or supplies to be consumed in the production process or in the
rendering of services.
d. Held for use in the production or supply of goods or services.
2. Which of the following should be excluded from an entity’s inventories?
a. Goods in transit purchased under FOB shipping point
b. Unsold good out on consignment
c. Goods given to prospective buyers under a ‘sale on trial’ agreement
d. Goods sold under installment sale whereby the entity retains legal title to protect the
collectability of the sale price.
3. Which of the following is included in an entity’s inventories?
a. Damaged and worthless merchandise
b. Goods sold under a sale with repurchase obligation
c. Goods in-transit sold under FOB shipping point
d. Goods purchased under a “lay-away” sales, physical possession over the goods is not
yet obtained
4. Under this shipping cost agreement, freight is not yet paid upon shipment. The carrier
collects the shipping costs from the buyer upon delivery.
a. Freight-collect
c. FOB shipping point
b. Freight prepaid
d. FOB destination
5. Which of the following is incorrect regarding the accounting for consigned goods?
a. Consigned goods are properly included in the inventory of the consignor and not the
consignee.
b. Freight incurred by the consignor in delivery the cosigned goods to the consignee forms
part of the cost of inventories.
c. The consignee records consigned goods received from the consignor through journal
entries.
d. The consignor should not recognize revenue until the consignee sells the goods to third
parties.
6. Inventories are classified on the statement of financial position as
a. Current assets
c. Financial instrument
b. Non-current assets
d. Intangible assets
7. Which of the following is an objective of inventory accounting according to PAS 2
inventories?
a. The proper recognition of cost of inventory that is charged as expense when the related
revenue is recognized.
b. The proper representation of cost of inventories recognized as assets in the financial
statements.
c. A and B
d. None of these
8. Spongebob Squarepants Co. utilizes an automated accounting system in which Spongebob
inputs the serial number of each item if inventory in the system. This enables Spongebob
to track the movement of each inventory. Which inventory system is Spongebob most
likely to be using?
a. Perpetual System
d. Spatula System
b. Periodic System
e. A and B
c. Patty System
9. Cost of goods sold is a residual amount under this system.
a. Skeletal system
c. Perpetual system
b. Endocrine System
d. Periodic system
10.Under this inventory system, a physical count is necessary before profit is determined.
a. Perpetual
c. Under no such system
b. Periodical
d. Periodic
11.Inventories are measures at
a. Cost
c. Replacement cost
b. Net realizable value
d. Lower of A and B
12.Which of the following costs is inventoriable?
a. Abnormal amount of wasted materials in the production
b. Advertisement costs
c. Storage costs of completed goods
d. Storage costs of party finished goods
13.Under the gross method of recording purchases,
a. Cash discounts are initially ignored and are recorded only when taken
b. Cash discounts are deducted from the cost of inventory on initial recognition
c. Cash discounts not taken are debited to a “purchase discounts lost” account.
d. A and C
14.ENDEAVOR TO TRY Co. purchased goods on account with a list price of ₱10,000 and the
following terms: 20%, 10%, 2/10, n30. If ENDEAVOR uses the net method of accounting for
cash discounts, the amount debited for the purchase is computed as
a. ₱10K x 80% x 90% x 98%
c. ₱10K x 80% x 90%
b. ₱10K x 20% x 10% 2 %
d. ₱10K x 90% x 80% x 89%
15.If the merchandise inventory at the end of the period is understated,
a. Gross profit will be overstated
b. Total equity will be overstated
c. Gross profit will be understated
d. Cost of merchandise sold will be understated
16.ZENITH HIGHEST POINT Co. buys and sells antiques. Each product is unique. If ZENITH
adopts PAS 2 Inventories, ZENITH Co.
a. Is required to use specific identification
b. Is required to use FIFO
c. Has the option of using either FIFO or specific identification.
d. Has the option of using specific identification, FIFO or the average method, but no FIFO.
17.When applying the lower of cost and net realizable value (NRV), inventories are
a. Usually written down to net realizable value on an item by item basis.
b. Usually not written down below fair value,
c. Usually written to net realizable value on a per classification basis, e.g., as finished
goods, work-in process and raw materials.
18.According to PAS 2 Inventories, the best evidence of the net realizable value of raw
materials is
a. Estimated selling price less cost to sell
b. Estimated selling price less costs to complete and costs to sell
c. Replacement cost
d. Fair value less costs to sell
19.Raw materials and manufacturing supplies held for use in the production of inventories are
a. Required under PAS 2 Inventories to be presented separately from the other
inventories.
b. Not disclosed since they are normally immaterial.
c. Not written down below cost if the finished products in which they will be incorporated
are expected to be sold at or above cost.
d. All of the above
20.Reversal of inventory write-downs
a. Are not prohibited under PFRSs.
b. Should not exceed the amount of write-downs previously recognized.
c. Are always recognized in profit or loss
d. All of these
SEATWORK (APRIL 26, 2021)
PROBLEM 3: EXERCISES
1. Joca Co. purchased goods with an invoice price of ₱200,000 on account from Nap Co. on
Dec. 27, 20x1. Nap shipped the goods on Dec. 31, 20x1and Joca received the shipment on
Jan. 2, 20x2. The related shipping costs were ₱10,000. Joca settled the account on Jan. 5,
20x2.
Requirements: Using the periodic inventory system, provide the entries in Joca’s books under
each of the following sale terms: (a) FOB Shipping point, Freight Collect; (b) FOB Destination,
Freight prepaid; (c) FOB shipping pint, freight prepaid; and (d) FOB destination, Freight collect.
(a) FOB Shipping Point, Freight Collect
Decembe
r 31, 20x1
Purchases
Accounts Payable
January 2,
20x2
Freight-in
Cash
January
5,20x2
200,000
200,000
to record purchases on account
10,000
to record payment of freight to the carrier
Accounts Payable
Cash
10,000
200,000
200,000
to record settlement of accounts payable
(b) FOB Destination, Freight Prepaid
Decembe
r 31, 20x1
January 2,
20x2
January
5,20x2
No Entry
-
Purchases
Accounts Payable
to record purchases on account
200,000
Accounts Payable
Cash
200,000
to record settlement of accounts payable
200,000
200,000
(c) FOB Shipping Point, Freight Prepaid
Decembe
r 31, 20x1
Purchases
Freight-in
Accounts Payable
200,000
10,000
to record purchases on account and freight-in
reimbursement to the seller
January 2,
20x2
January
5,20x2
No Entry
Accounts Payable
Cash
210,000
to record settlement of accounts payable
inclusive of reimbursement for freight
210,000
210,000
(d) FOB Destination, Freight Collect
Decembe
r 31, 20x1
January 2,
20x2
No Entry
Purchases
Accounts Payable
to record purchases on account
200,000
20,000
Accounts Payable
Cash
10,000
Accounts Payable
Cash
190,000
10,000
to record freight paid on behalf of the seller
January
5,20x2
2.
a)
b)
c)
d)
190,000
to record settlement of accounts payable net
of freight paid on behalf the seller
Worried Co. had the following transactions during the period:
Purchased goods worth ₱50,000 on account. Freight of ₱4,000 was paid on the shipment.
Returned damaged goods, costing ₱5,000, to the supplier.
Sold goods costing ₱30,000 for ₱90,000 on account.
Received goods with sale price of ₱6,000 and cost ₱2,000 from a customer.
Requirement: Prepare the journal entries under (a) Perpetual inventory system and (b)
Periodic inventory system.
Perpetual System
Periodic System
Purchased goods worth ₱50,000 on account. Freight of ₱4,000 was paid on the shipment.
Merchandise Inventory
54,000
Purchases
50,000
Accounts Payable
50,000
Freight In
4,000
Cash
Accounts Payable
50,000
4,000
Cash
4,000
Returned damaged goods, costing ₱5,000, to the supplier.
Accounts Payable
5,000
Accounts Payable
5,000
Merchandise Inventory
5,000
Purchase Returns
5,000
Sold goods costing ₱30,000 for ₱90,000 on account.
Accounts Receivable
90,000
Accounts Receivable
90,000
Sales
Sales
90,000
90,000
No Entry
Cost of Goods Sold
30,000
Inventory
30,000
Received goods with sale price of ₱6,000 and cost ₱2,000 from a customer.
Sales returns
6,000
Sales returns
6,000
Accounts Receivable
6,000
Accounts receivable
6,000
Inventory
Cost of Goods Sold
2,000
2,000
No Entry
3. Indicate the effect of the following errors on gross profit and cost of goods sold (COGS),
i.e., ‘understatement’ or ‘overstatement’. Treat each item independently of the other
items and assume a periodic inventory system.
Nature of error
Effect of error on:
Gross Profit
COGS
a. Overstatement of beginning inventory
Overstatement
b. Understatement of purchases
c. Overstatement of purchase returns
Understateme
nt
Overstatement
d. Understatement of purchase returns
Understateme
Understateme
nt
Overstatement
Understateme
nt
Overstatement
e. Overstatement of ending inventory
f. Understatement of ending inventory
nt
Overstatement
Understateme
nt
Understateme
nt
Overstatement
4. Horizon Co. purchased inventory with a list price of ₱100,000 on account under credit
terms of 10%, 2/10, n/30.
Requirement: Provide the journal entries under (a) Gross method and (b) Net method
assuming (i) the account was paid within the discount period and (ii) the account was paid
beyond the discount period. Horizon uses the periodic inventory system.
Gross method
Purchase of inventory
Purchase
Accounts Payable
90,000
Net method
90,000
Purchases
88,200
Accounts Payable
88,200
*(100,000x90%)
*(100,000x90%x98%)
Trade discount are deducted from the list price to
determine the invoice price gross of cash
discount
Trade discount and cash discount are deducted
from the list price to determine the invoice price
net of cash discount.
Assume payment is made within discount period
Accounts Payable
90,000
Accounts Payable
Purchase Discounts (90,000x2%)
Cash
1,800
88,200
Cash
88,200
Assume payment is made beyond discount period
Accounts Payable
90,000
Accounts Payable
Cash
Purchase discount lost
90,000
1,800
Cash
90,000
88,200
88,200
5. Using T-accounts, compute for the missing amounts in the table below.
Inventory, beg.
Net purchase
Cost of sales
Inventory,
end.
a.
10,000
198,000
112,000
?
b
36,000
145,000
?
56,000
.
c.
15,000
?
64,000
9,000
d
?
112,000
89,200
48,000
.
(a)Inventory, ending
Inventory,
beg.
10,000
198,000
112,000
Cost of sales
Net Purchase
₱96,000
(b)Cost of sales
Inventory,
beg.
36,000
145,000
56,000
Inventory. end
Net Purchase
₱125,000
(c) Net purchase
Cost of Sales
Inventory,
64,000
9,000
15,000
Inventory,
beg.
end.
₱58,000
(d)Inventory, beginning
Cost of Sales
89,000
Inventory,
48,000
112,000
Net Purchases
end.
₱25,000
PROBLEM 4: MULTIPLE CHOICE – COMPUTATIONAL
1. The inventory records of Sunset Co. on December 1, 20x1 show balance of ₱260,000. The
following information was gathered:
a. Goods costing ₱10,000, purchased FOB shipping point, were not included in the ledger
balance because these were still in transit as of December 31, 20x1. The supplier shipped
the goods on December 30, 20x1 and prepaid the freight of ₱1,000.
b. Goods coting ₱5,000 were received on December 31, 20x1. These were recorded on
January 3, 20x2.
c. Good costing ₱16,000 were shipped to a customer on December 30, 20x1 on an FOB
shipping point term. The goods were included in the ledger balance because the customer
received the shipment only on January 4, 20x2.
d. Goods costing ₱20,000 were shipped to a customer on December 31, 20x1 on an FOB
destination term. The goods were not included in the ledger balance because the goods
were already dispatched when the inventories were counted at around 11 P.M. on
December 31, 20x1.
e. Obsolete good costing ₱4,000 were included in the ledger balance. These goods have no
resale value
What is the correct amount of Inventory on Dec. 31, 20x1?
a. 246,700
b. 276,000
c. 284,000
d. 306,0002
2. Gordon Company’s inventory at June 30, 2002 was ₱75,000 based on a physical count of
goods priced at cost, and before any necessary year-end adjustment relating to the
following:


Included in the physical count were goods billed to a customer FOB shipping point
on June 30, 2002. These goods had a cost of ₱1,500 and were picked up by the
carrier on July 10, 2002.
Goods shipped FOB destination on June 28, 2002, from a vendor to Gordon, were
received and recorded only on July 3, 2002. The invoice cost was ₱2,500.
What amount should Gordon report as inventory on its June 30, 2002, balance sheet?
a. 73,500
b. 74,000
c.75,000
d.
76,500
3. The following information was derived from the 20x1 accounting record of Clem Co.:
Beginning inventory
Purchases
Freight In
Transportation to consignees
Freight out
Ending inventory
Clem’s 20x1 cost of sales was
Good in
warehouse
Goods held by consignees
110,000
480,000
10,000
12,000
60,000
5,000
8,000
20,000
30,000
145,000
a. 455,000
b. 485,000
c. 507,000
d. 512,000
4. The following items were included in Opal Cp.’s inventory account at December 31, 20x1.



Merchandise out on consignment, at sales price, including 40% mark up on
selling price
Goods purchased, in transit, shipped F.O.B shipping point
Goods held on consignment by Opal
₱40,000
36,000
27,000
By what amount should Opal’s inventory account at December 31, 20x1, be reduced?
a. 103,000
b. 67,000
c. 51,000
d. 43,000
5. On August 1, Stephan Company recorded purchases of inventory of ₱80,000 and ₱100,000
under credit terms of 2/15, net 30. The payment due on the ₱80,000 purchase was
remitted on August 14. The payment due on the ₱100,000 purchase was remitted on
August 29. Under the net method and the gross method, these purchases should be
included at what respective net amounts in the determination of cost of goods available
for sale?
Net Method
Gross Method
Net Method
Gross Method
a.
178,400
176,400
c.
176,400
176,400
b
176,400
176,400
d
180,000
176,400
.
.
6. On Dec. 15, 20x1, Pork Stew Co. purchases inventory with invoice price of ₱380,000 on
account under credit terms 2/10, n/30. Pork Stew uses the method in accounting for cash
discounts. On Dec. 31, 20x1, the account is not yet unsold, what amounts of inventory and
accounts payable are reported in Pork Stew’s Dec 31, 20x1 financial statements?
Accounts Payable
Accounts Payable
Inventory
Inventory
a.
380,000
176,400
c.
176,400
176,400
b
372,400
176,400
d
180,000
176,400
.
.
Use the following information for the next two questions:
Neer corp. purchased merchandise during 2004 on credit for ₱200,000; items 2/10, n/30. All
of the gross liability except ₱40,000 was paid within the discount period. The reminder was
paid within the 30-day term. At the end of the annual accounting period, December 1, 2004,
90% of the merchandise had been sold and 10% remained in inventory. The company uses a
periodic system. There was no beginning inventory.
7. How much are the ending inventory and cost of goods sold, respectively, under the net
method?
a. 19,600;176,400
c. 20,000;176,400
b. 20,000;176,800
d. 19,600;176,800
8. How much are the ending inventory (EI) and cost of goods sold (COGS), respectively,
under the gross method, assuming (i) the discount is allocated only to the goods sold; and
(ii) the discount is allocated to both the ending inventory and the goods sold?
Allocation to COGS only
Allocation of both COGS and EI
Use the
following
EI
COGS
EI
COGS
information
for the next
a.
20,000
177,120
19,000
19,000
two
questions:
b.
19,000
176,400
20,000
20,000
Information
on Entity A’s
c.
20,000
176,800
19,680
19,680
inventory of
Product X is
d.
19,600
176,800
20,000
20,000
as follows?
Date
Transaction
June 1
8
14
18
24
29
Quantity
Balance forwarded
Sale
Purchase
Sale
Purchase
Sale
1,400
400
800
900
700
600
Unit
Cost
₱24
Total
cost
33,600
₱35
28,000
₱30
21,000
₱82,600
9. What amounts of ending inventory (EI) and cost of goods sold (COGS) are reported under
each of the following cost formulas?
Beginning Inventory in units
Net purchases in units
(800+700)
Ending inventory to be
collected
1,40
0
1,50
0
2,90
0
TGAS in units
2,900
Quantity of goods sold
(400+900+600)
(1,90
0)
1,000
Units
1,000
Unit Cost
Total cost
(700)
₱30
₱21,000
₱35
10,500
32,000
Cost of goods sold is then computed as follows:
TGAS in peso
Ending inventory at cost
Cost of gods sold
Allocated as follows:
From June 24 purchase
Balance to be collected to the next
most recent purchase date
From June 14 purchase
300
Ending inventory at cost
(300)
-
Date
1-June
14
8
Inventory
Purchase
Net sales
Transaction
Allocation:
From beg. Inventory
From June 14 purchase
24
18
Purchase
sales
Units
1,400
800
400
Unit cost
24
35
Total cost
33,600
28,000
(1,400)
(1,000)
700
900
24
35
30
(33,600)
(35,000)
21,000
82,600
(32,000)
50,600
Allocation:
29
a.
b.
c.
d.
From June 14 purchase (bal.)
From June 24 purchase
sales
(200)
(700)
600
FIFO periodic
EI
COGS
31,500
51,100
32,000
50,600
29,800
52,800
31,500
51,100
35
30
(7,000)
(21,000)
FIFO perpetual
EI
COGS
32,000
50,600
31,500
51,100
29,800
52,800
31,500
51,100
10.What amounts of ending inventory (EI) and cost of goods sold (COGS) are reported under
each of the following cost formulas?
Ending inventory in units
1,000
weighted ave . cost=
TGAS∈ peso
TGAS∈units
TGAS in peso
Ending inventory cost
Multiply by weighted ave.
cost
Ending inventory cost
28.48
28,480
82,600
28,480
Cost of gods
sold ave . cost=
weighted
82,600
54,120
=₱ 28.48
2,900
Weighted average
EI
a.
28,480
b.
22,360
c.
24,480
d.
22,360
- Periodic
COGS
54,120
60,240
54,120
60,240
Weighted average - Periodic
EI
COGS
29,377
53,223
29,377
53,223
26,880
55,720
26,880
55,720
Use the following information for the next two questions:
Information on Jackhammer Co.’s inventory of a certain product is as follows:
Total
Date
Transaction
Units
Unit
cost
Cost
1-Nov
Inventory
2,000
72,000
₱36.00
7
Purchase
3,000
37.20
111,600
12
Sales
4,200
15
Purchase
4,800
38.00
182,400
16
Sales return
600
22
Sales
3,800
29
Purchase
1,900
38.60
73,340
30
Purchase returns
300
38.60
(11,580)
₱427,7
60
11.What amounts of ending inventory (EI) and cost of goods sold (COGS) are reported under
each of the following cost formulas?
Beginning Inventory in units
2,000
TGAS in units
Net purchases in units
(3,000+4,800+1,900-300)
9,400
Quantity of goods sold (4,200600+3,800))
11,40
0
Ending inventory to be
collected
Units
4,000
Unit Cost
Total cost
11,40
0
(7,40
0)
4,000
Cost of goods sold is then computed as follows:
TGAS in peso
Ending inventory at cost
Cost of gods sold
427,760
(152,960)
274,800
Allocated as follows:
From Nov 29 purchase
(1,600)
(1,900-
300)
Balance to be collected to the next
most recent purchase date
From Nov 15 purchase
Ending inventory at cost
a.
b.
c.
d.
₱38.60
₱61,760
2,400
(2,400)
₱38.00
-
91,200
152,960
FIFO periodic
EI
COGS
151,500
276,260
152,960
274,800
152,960
274,800
131,500
296,260
FIFO perpetual
EI
COGS
152,960
264,800
151,500
276,260
152,960
274,800
131,500
296,260
12.What amounts of ending inventory (EI) and cost of goods sold (COGS) are reported under
each of the following cost formulas?
weighted ave . cost=
weighted ave . cost=
TGAS∈ peso
TGAS∈units
427,760
=₱ 37.52
11,400
Weighted average
EI
a.
150,080
b.
150,080
c.
150,080
d.
152,360
– Periodic
COGS
277,680
277,680
277,680
275,400
Ending inventory in units
Multiply by weighted ave.
cost
Ending inventory cost
TGAS in peso
Ending inventory cost
Cost of gods sold
4,000
37.52
150,080
426,760
(150,080)
276,680
Weighted average - Perpetual
EI
COGS
152,270
275,490
159,377
268,383
156,880
270,880
161,280
266,480
13.With LIFO, cost of goods sold is ₱195,000, and ending inventory is ₱45,000. FIFO ending
inventory is ₱65,000, how much is FIFO cost of goods sold?
TGAS (195,000 LIFO COGS + 45,000 EI)
240,000
FFIO ending inventory
(65,000)
FIFO cost of goods sold
175,000
a. 215,000
b. 195,000
c. 175,000
14.Thug Co., a VAT payer, purchased goods and incurred the following:
Invoice price (inclusive of ₱12,000 Value-added Tax)
Shipping costs
Transit insurance
Commission to broker
Interest incurred on the loan used to finance the purchase
What amount is capitalized as cost of inventory?
a. 157,600
b. 172,600
c. 160,600
15.Headache Co.’s records show the following information:
Purchases
Purchase returns
Purchase discounts
d. 65,000
112,000
40,000
12,000
5,600
15,000
d. 152,000
500,000
25,000
10,000
Beginning inventory
Ending inventory
Freight-in
Freight-out
Commissions paid to sellers on sales
Sales
Sales discounts
Sales returns
Gross sales
Less: Sales Returns
Sales Discount
Net Sales
Less: Cost of Sales
Beginning Inventory
Add: Purchases
Less: Purchases Returns
Purchase Discounts
Net Purchases
Add: Freight-In
Net cost of purchases
Total goods available for sale
Less: Ending Inventory
Cost of sales
Gross profit
How much is the gross profit?
a. 190,000
60,000
75,000
60,000
40,000
200,000
1,000,000
50,000
10,000
1,000,000
50,000
10,000
940,000
60,000
500,000
25,000
10,000
465,000
60,000
525,000
585,000
75,000
450,000
₱490,000
b. 20,000
c. 430,000
d. 490,000
16.Information on Crythena Co.’s inventories of Products X, Y and Z on Dec. 31, 20x1 is as
follows:
X
Y
Z
Number of units
3,700
2,500
1,300
Purchase cost (per unit)
₱50
₱30
₱109
Delivery cost from supplier (per unit)
5
4
68
Estimated selling price (per unit)
56
60
250
Estimated cost to sell (per unit)
4
8
75
X
Y
Z
50
5
250
30
4
120
109
68
7,412
56
(4)
52
52
(732,60
0)
60
(8)
52
52
(170,00
0)
250
(75)
175
`175
(52-250)
x3,700 units
(52-120)
x2,500 units
Cost:
Purchase cost
Delivery cost from supplier (freight-in)
Cost per unit
Net Realizable Value:
Estimated Selling Price
Selling Cost
NRV per unit
Lower of Cost and NRV
Write-down
(9,408,1
00)
(175-7,412)
x1,300 units
X
Lower of Cost and NRV
Multiply by: Number of units
Inventory, Dec. 31, 20x1
52
3,700
192,400
Y
52
2,500
130,000
Z
175
1,300
227,500
What amount of inventory is reported in the financial statements?
a. 549,900
b. 518,600
c. 504,900
d. 490,800
17.Information on Bamboo Co.’s inventories on Dec. 31, 20x1 is as follows:
Cost
NRV
Raw materials and factory supplies
160,000 148,000
Finished goods
1,780,0 1,870,00
00
0
What amount of write-down is recognized on Dec. 31, 20x1?
a. 12,000
b. 78,000
c. 90,000
d. 0
18. Information on broken Co.’s inventories is as follows:
20x2
20x1
Inventory, December 31 at cost
450,000 440,000
Inventory, December 31 at NRV
490,000 410,000
What amount of inventory write-up (or reversal of inventory write-down) is recognized in
20x2?
a. 40,000
b. 30,000
c. 20,000
d. 0
19.Temple Co.’s records show the following information:
Beginning Inventory
Purchases
Purchase returns
Purchase discounts
Freight-in
Cost of goods sold
Ending inventory
Beginning Inventory
Add: Purchases
Less: Purchases Returns
Purchase Discounts
Net Purchases
Add: Freight-In
Net cost of purchases
Total goods available for sale
Less: Ending Inventory
Cost of sales
60,000
500,000
25,000
10,000
?
510,000
75,000
60,000
500,000
25,000
10,000
465,000
60,000
525,000
585,000
75,000
510,000
How much are the freight-in and total cost of goods available for sale, respectively?
a. 70,000;515,000
c. 40,000;545,000
b. 60,000;585,000
d. 0;525,000
20.Lunch Co.’s records show the following information:
Beginning Inventory
Purchases
Purchase returns
Purchase discounts
Freight-in
Total cost of goods available for sale
Cost of goods sold
60,000
50,000
?
10,000
60,000
585,000
510,000
How much are the purchase returns and ending inventory, respectively?
a. 25,000;75,000
c. 25,000;85,000
b. 0;75,000
d. 15,000;75,000
Beginning Inventory
Add: Purchases
Less: Purchases Returns
Purchase Discounts
Net Purchases
Add: Freight-In
Net cost of purchases
Total goods available for sale
Less: Ending Inventory
Cost of sales
60,000
500,000
25,000
10,000
465,000
60,000
525,000
585,000
75,000
510,000