Exercises -6 (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 150,000
Items currently being used for window display 200,000
Items on counter for sale 800,000
Items in receiving department, refused by us because of damage 180,000
Items include in count, damaged and unsalable 50,000
Items in the shipping department 250,000

Required:
Compute the correct amount of inventory

Exercises -7 (IAA)
Natal Company included the following items under inventories:

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

Exercises -8 (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

Exercises -9 (AICPA Adapted)

The following purchase transactions occurred during the last few days of the Myriad
Company's
fiscal year, which ends December 31, 2013, 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 receive on January 4. The merchandise was excluded in the
inventory.

4. An invoice for P90,000, FOB shipping point, was received and recorded on December 15. The
receiving report indicates that the goods were 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 December 31, 2013. Books are still open.

Exercises -10 (AICPA Adapted)

In an annual audit on December 31, 2013, the following transactions of Novelty Company are
discovered.

1. Merchandise was received on January 8, 2014, and the related purchase invoice recorded on
January 5, 2014. The invoice showed the shipment was made on December 29, 2013, FOB
destination.
2. Merchandise was received on January 8, 2014, and the invoice was not recorded. It was
located in the hands of the purchasing agent and was marked on consignment.

3. A packing case containing merchandise was standing in the shipping room when the
physical
inventory was taken. It was not included in the inventory because it was marked "Hold for
shipping instructions." An investigation revealed that the customer's order was dated
December
18, 2013, but the case was shipped and the customer billed on January 10, 2014.

4. Merchandise received on January 6, 2014 was recorded as a purchase on January 7, 2014.

The
invoice showed shipment was made FOB supplier's warehouse on December 31, 2013. Since it
was not on hand on December 31, 2013, it was not included in inventory.

5. A special article, fabricated to order for a customer, was finished and in the shipping room
on
December 31, 2013. The customer was billed on that date and the article was excluded from
inventory although it was shipped on January 4, 2014.

Required:
State whether the merchandise should be included in the inventory on December 31, 2013 and
state the reason for each item.

Exercises -11 (IAA)

Shindig Company is preparing its 2013 year-end financial statements. Prior to any
adjustments,
inventory is valued at P7,600,000. The following information has been found relating to certain
inventory transactions:

 Goods valued at P1,000,000 are on consignment with a customer. These goods are not
included in the year-end inventory figure.
 Goods costing P250,000 were received from a vendor on January 5, 2014. The related
invoice was received and recorded on January 12, 2014. The goods were shipped on
December 31, 2013, terms FOB shipping point.
 Goods costing P250,000 were shipped on December 31, 2013, and were delivered to the
customer on January 2, 2014. The terms of the invoice were FOB shipping point. The
goods were included in ending inventory for 2013 even though the sale was recorded in
2013.
 A P350,000 shipment of goods to a customer on December 31, 2013 terms FOB
destination, was not included in the year-end inventory. The goods cost P260,000 and
were delivered to the customer on January 8, 2014. The sale was properly recorded in
2014.
 An invoice for goods costing P350,000 was received and recorded as a purchase on
December 31, 2013. The related goods, shipped FAS, were in transit on December 31,
2013 and received on January 2, 2014, and were not included in the physical
inventory.
 Goods valued at P650,000 are on consignment from a vendor. These goods are not
included in the year-end inventory figure.
 A P1,050,000 shipment of goods to a customer on December 30, 2013, terms FOB
destination, was recorded as a sale in 2013. The goods, costing P840,000 and delivered
to the customer on January 6, 2014, were not included in 2013 ending inventory.

Required:
Compute the correct amount of inventory to be reported in the statement of financial position
on
December 31, 2013.

Exercises -12 (IAA)

Integrity Company submitted an inventory list on December 31, 2013 which showed a total of
P5,000,000. The following information may or may not be relevant to the inventory value
submitted:

 Excluded from the inventory was merchandise costing P80,000 because it was
transferred to the delivery department for package on December 28, 2013 and for
shipping on January 2, 1014.
 The bill of lading and other import documents on a merchandise were delivered by the
bank and the trust receipt accepted by the entity on December 28, 2013. Taxes and
duties have been paid on this shipment but the broker did not deliver the merchandise
until January 7, 2014. Delivered cost of the shipment totaled P800,000. This shipment
was not included in the inventory on December 31, 2013.
 The review of the entity’s purchase orders showed a commitment to buy P100,000
worth of merchandise from a supplier. This was not included in the inventory because
the goods were received on January 3, 2014.
 Supplier’s invoice for P300,000 worth of merchandise dated December 28, 2013 was
received through the mail on December 30, 2013 although the goods were in transit on
December 31, 2013 and arrived only on January 4, 2014. Shipment term is CIF. This
item was not in the December 31, 2013 inventory by the entity.
 Goods valued at P20,000 were received from a supplier on December 28, 2013 for
approval. The inventory team included this merchandise in the list but did not place
any value on it. On January 4, 2013, the entity informed the supplier by long distance
telephone of the acceptance of the goods and the supplier’s invoice was received on
January 7, 2014.
 On December 27, 2013, an order for P25,000 worth of merchandise was placed. This
was included in the year-end inventory although it was received only on January 5,
2014. The seller shipped the goods FOB destination.

Required:
Determine the inventory to be reported in the statement of financial position on December 31,
2013.

Exercises -13 (AICPA Adapted)

Quarry Company, a manufacturer of small tools, provided the following information for the
year
ended December 31, 2013.

Inventory at December 31 based on physical count 1,750,000

Accounts payable at December 31 1,200,000
Net sales (sales less sales return) 8,500,000

Additional information is as follows:

1. Included in the physical count were tools billed to a customer FOB shipping point on
December 31, 2013. These tools had a cost of P28,000 and were billed at P35,000. The
 shipment was in loading dock waiting to be picked up by the common carrier.
2. Goods were inn transit from a vendor to Quarry Company on December 31, 2013. The
invoice cost was P50,000, and the goods were shipped FOB shipping point on December 29,
2013.
3. Work in process inventory costing P20,000 was sent to an outside processor for plating on
December 30, 2013.
4. Tools returned by customers and held pending inspection in the returned goods area on
December 31, 2013 were not included in the physical count. On January 8, 2014 the tools
costing P26,000 were inspected and returned to inventory. Credit memos totaling P40,000
were issued to the customers on the same date.
5. Tools shipped to a customer FOB destination on December 26, 2013, were transit on
December 31, 2013, and had a cost of P25,000. Upon notification of receipt by the
customer on January 2, 2014, Quarry Company issued a sales invoice for P42,000.
6. Goods, with an invoice cost of P30,000, received from a vendor at 5:00 P.M. on December
31, 2013, were recorded on a receiving report dated January 2, 2014. The goods were not
included in the physical count, but the invoice was included in accounts payable on
December 31, 2013.
7. Goods received from a vendor on December 26, 2013 were included in the physical count.
However, the related P60,000 vendor invoice was not included in accounts payable on
December 31, 2013, because the accounts payable copy of the receiving report was lost.
8. On January 3, 2014, a monthly freight bill in the amount of P20,000 was received. The bill
specifically related to merchandise purchase d in December 2013, one-half of which was
still in the inventory on December 31, 2013. The freight charge was not included in either
the inventory or in accounts payable at December 31, 2013.

Required:
Compute the correct balances of the December 31 inventory, accounts payable and net sales.

Exercises -14 (PHILCPA Adapted)

The inventory on hand on December 31, 2013 for Faith Company is valued at a cost of
P950,000. The following items were not included in this inventory amount:

Item 1: Purchased goods in transit, shipped FOB destination, invoice price P30,000 which
includes freight charge of P1,500.
Item 2: Goods held on consignment by faith Company at a sales price of P28,000, including
sales commission of 20% of the sales price.
Item 3: Goods sold to a customer, under terms FOB destination, invoiced for P18,500 which
includes P1,000 freight charge to deliver the goods. Goods are in transit. The entity’s
selling price is 140% of cost.
Item 4: Purchased goods in transit, terms FOB shipping point, invoice price P50,000, freight
cost, P2,500.
Item 5: Goods out on consignment to a consignee, sales price P35,000, shipping cost of P2,000.

Required:
Compute the correct amount of inventory on December 31, 2013.

Exercises -15 (AICPA Adapted)

Fancy Company is a wholesale distributor of automotive replacement parts. Initial amounts
taken from accounting records on December 31, are a s follows:

Inventory at December 31 based on physical count 1,250,000

Accounts payable 1,000,000
Sales 9,000,000

Additional information is as follows:

1. 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, 2013, and in
accounts payable on December 31, 2013.
2. P20,000 of parts which were purchased and paid for in December 2013, were sold in the
last week of 2013 and appropriately recorded as sales of P28,000. The parts were included
in the physical count on December 31, 2013, because the parts were on the loading dock
waiting to be picked up by the customers.
3. Parts in transit on December 31, 2013 to customers, shipped FOB shipping point, oh
December 28, 2013, amounted to P34,000. The customers received the parts on January 6,
2014. Sales of P40,000 to the customers for the parts were recorded by Fancy Company on
January 2, 2014.
4. 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, 2013.
5. Goods were in transit from a vendor to Fancy Company on December 31, 2013. The cost of
goods was P25,000. The goods were shipped FOB shipping point on December 29, 2013.

Required:
Compute the correct balances of the December 31 inventory, accounts payable and sales.

Exercises -16 (AICPA Adapted)

In an audit of Ingenious Company for the year ended December 31, 2013, the entity took its
annual physical inventory on November 30, 2013. The entity’s inventory which includes raw
material and work in process is on a perpetual basis and FIFO pricing is used. There are no
finished goods. The physical inventory on November 30, 2013 revealed that the book inventory
of P6,057,000 was understated by P300,000. To avoid distorting the interim financial
statements, the entity decided not to adjust the book inventory until year-end except for
obsolete items. Data pertaining to the November 30, 2013 inventory are:

a. Pricing tests showed that the physical inventory was overstated by P220,000
b. Footing and extension errors resulted in a P15,000 understatement of physical inventory
c. Direct labor included in the physical inventory amounted to P1,000,000. Overhead was
applied at 200% of direct labor
d. The physical inventory included obsolete materials recorded at P25,000. During December,
these obsolete materials was removed from inventory account by a charge to cost of sales

Data pertaining to the December 31, 2013 inventory are:

a. Total debits during December are P2,470,000 for purchases, P1,210,000 for direct labor,
P2,520,000 for manufacturing overhead expense, and P6,860,000 for cost of sales
b. The cost of sales of P6,860,000 included direct labor of P1,380,000
c. A special order started and completed December has excessive scrap loss of P80,000 which
was charged to manufacturing overhead expense.

Required:
1. Determine the correct amount of physical inventory on November 30, 2013
2. If the physical inventory on November 30, 2013 was P5,770,000, determine the correct
inventory on December 31, 2013.

Exercises -17 (ACP)

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. Purchased 800 car seatcovers on account at P1,000 each

2. Returned 50 defective car seatcovers to supplier and received credit
3. Paid 600 of the car seatcovers purchased
4. Sold 790 car seatcovers at P2,000 each
5. 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

Exercises -18 (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.

Exercises -19 (IAA)

The following transactions pertain to the purchases of Autumn Company for the current year,
its 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

Exercises -20 (ACP)

Fall Company began operations in the current year. The entity maintains perpetual inventory
records.

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.

Exercises -21 (AICPA Adapted)

Honor Company’s inventory on December 31, 2013 was P1,500,000 based on 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
December 31, 2013. These goods had a cost of P30,000 and were picked up by the carrier on
January 10, 2014.

Goods shipped FOB destinations on December 28, 2013 from a vendor to Honor Company were
received on January 4, 2014. The invoice cost was P50,000.

What amount should be reported as inventory on December 31, 2013?

a. 1,470,000
b. 1,480,000
c. 1,500,000
d. 1,550,000

Exercises -22 (AICPA Adapted)

Empty Company’s inventory on December 31, 2013 was 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,
2013 was received and recorded on January 5, 2014.

Goods in the shipping area were excluded from the inventory although shipment was not made
until January 4, 2014. The goods billed to the customer FOB shipping point on December 30,
2013, had a cost of P400,000.

What amount should be reported as inventory on December 31, 2013?

a. 2,500,000
b. 2,600,000
c. 2,900,000
d. 3,000,000

Exercises -23 (IAA)

The physical count conducted in the warehouse of Lenient Company on December 31, 2013
revealed total cost of P3,600,000. However, the following items were excluded from the count:

 Goods sold to a customer, which are being held for the customer to call for at the
customer’s convenience with a cost of P200,000.
 A packing case containing a product costing P80,000 was standing in the shipping room
when the physical inventory was taken. It was not included in the inventory because it was
marked “hold for shipping instructions”.
 Goods in process costing P300,000 held by an outside processor for further processing.

What is the correct inventory on December 31, 2013?

a. 4,180,000
b. 3,880,000
c. 3,980,000
d. 4,100,000

Exercises -24 (IAA)

The audit of Joust Company revealed a physical inventory on December 31, 2013 with a cost of
P4,000,000. The following items were excluded from the count:
 A special machine, fabricated to order for a customer costing P400,000, was finished and
specifically segregated on December 31, 2013. The customer was billed on that date and
the machine excluded from inventory although it was shipped on January 4, 2014.
 Merchandise costing P50,000 shipped by a vendor FOB seller on December 28, 2013 and
received by Joust Company on January 10, 2014.

What is the correct inventory on December 31, 2013?

a. 4,000,000
b. 4,400,000
c. 4,450,000
d. 4,050,000

Exercises -25 (AICPA Adapted)

On December 28, 2013, Caress Company purchased goods costing P500,000. The term is FOB
destination. These goods were received on December 31, 2013. Some of the costs incurred in
connection with the purchase of the goods were P10,000 packaging for shipment, P15,000
shipping and P25,000 special handling charge. On December 31, 2013, what is the
measurement of inventory?
a. 540,000
b. 535,000
c. 550,000
d. 500,000

Exercises -26 (IFRS)

Childish Company has a cost card in relation to an inventory:

Materials 700,000
Storage costs of finished goods 180,000
Delivery to customers 40,000
Irrecoverable purchase taxes 60,000

At what figure should the inventory be measured?

a. 880,000
b. 760,000
c. 980,000
d. 940,000

Exercises -27 (IFRS)

Eagle Company produced units of a certain product. The costs incurred were P180,000 direct
materials and labor, P25,000 variable production overhead, P15,000 factory administrative
cost and P20,000 fixed production cost. What is the correct inventory value of the product?
a. 205,000
b. 225,000
c. 195,000
d. 240,000

Exercises -28 (IFRS)

Parrot Company provided the following inventory data:

Materials 700,000
Production labor costs
180,000
Production overhead 40,000
General administration costs 60,000
Marketing costs 50,000
What is the value of the completed inventory?
a. 630,000
b. 850,000
c. 750,000
d. 900,000

Exercises -29 (IAA)

Brandy Company took a physical inventory at the end of the year and determined that
P2,600,000 of goods were on hand. In addition, the entity determined that P200,000 of goods
purchased in transit shipped FOB shipping point were actually received two days after the
inventory count and that the entity had P300,000 of goods out on consignment. What amount
should be reported as inventory at the end of the year?
a. 2,600,000
b. 2,800,000
c. 2,900,000
d. 3,100,000

Exercises -30 (IAA)

Scotch Company took a physical inventory at the end of the year and determined that
P1,900,000 of goods were on hand. In addition, the entity determined that P240,000 of goods
purchased in transit shipped FOB destination. The goods were actually received three days
after the inventory count. The entity sold P100,000 worth of inventory FOB destination. Such
inventory is in transit at year-end. What amount should be reported as inventory at year-end?
a. 1,900,000
b. 2,140,000
c. 2,000,000
d. 2,240,000

Exercises -31 (IAA)

Tequila Company had at year-end P200,000 office supplies, P1,350,000 raw materials,
P2,950,000 goods in process, P3,600,000 finished goods and P300,000 prepaid insurance.
What total amount should be reported as inventories in the statement of financial position at
year-end?
a. 8,100,000
b. 3,600,000
c. 3,800,000
d. 7,900,000

Exercises -32 (IAA)

Cognac Company used the perpetual inventory method. On December 1, the entity purchased
P1,500,000 of inventory, terms 2/10, n/30. On December 5, the entity returned goods that
cost P150,000. On December 11, the entity paid the supplier. On December 11, what account
should be credited?
a. Purchase discount for P30,000
b. Inventory for P30,000
c. Purchase discount for P27,000
d. Inventory for P27,000

Exercises -33 (IAA)

Wine Company recorded purchases at net amount. On December 10, the entity purchased
merchandise on account, P4,000,000, terms 2/10, n/30. The entity returned P300,000 of the
December 10 purchased and received credit on account. The account had not been paid on
December 31.
1. What amount should be recorded as purchase return?
a. 270,000
b. 306,000
c. 300,000
d. 294,000
2. By how much should the account payable be adjusted on December 31?
a. 74,000
b. 86,000
c. 80,000
d. 0

Exercises -34 (IFRS)

Brilliant Company purchases motorcycles from various countries and exports them to Europe.
The entity has incurred the following costs during the current year:

Cost of purchases based on vendors’ invoices 5,000,000

Trade discounts on purchases already deducted from vendors’ invoices 500,000
Import duties 400,000
Freight and insurance on purchases 1,000,000
Other handling costs relating to imports 100,000
Salaries of accounting department 600,000
Brokerage commission paid to agents for arranging imports
200,000
Sales commission paid to sales agents 300,000
After-sales warranty costs 250,000

What is the total cost of the purchases?

a. 5,700,000
b. 6,100,000
c. 6,500,000
d. 6,700,000

Exercises -35 (AICPA Adapted)

At year-end, Bailiwick Company purchased goods costing P1,000,000 shipped FOB shipping
point. Costs incurred by the entity in connection with the purchase and delivery of the goods
were as follows:

Normal freight charge 30,000

Handling cost 20,000
Insurance on shipment 5,000
Abnormal freight charge for express shipping 12,000

What is the total cost of the inventory?

a. 1,050,000
b. 1,030,000
c. 1,055,000
d. 1,067,000

Exercises -36 (AICPA Adapted)

Dignity Company had the following consignment transactions during 2013:

Inventory shipped on consignment to a consignee 600,000

Freight paid by Dignity 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 through December 31, 2013. On December 31, 2013,
what amount should be reported as consigned inventory?
a. 1,500,000
b. 650,000
c. 850,000
d. 600,000

Exercises -37 (AICPA Adapted)

On October 1, 2013, Humility Company consigned 50 freezers to a consignee for sale at
P10,000 each and paid P20,000 in transportation cost. On December 30, 2013, the consignee
reported the sale of 40 freezers and remitted P340,000. The remittance was net of the agreed
15% commission. What amount should be recognized as consignment sales revenue for 2013?
a. 400,000
b. 340,000
c. 500,000
d. 425,000

Exercises -38 (AICPA Adapted)

On December 1, 2013, Gratitude Company received 1,000 sweaters on consignment from a
consignor. The cost for the sweaters was P800 each, and they were priced to sell at P1,000. The
commission on consigned goods is 10%. On December 31, 2013, 100 sweaters remained. On
December 31, 2013, what amount should be reported as payable for consigned goods?
a. 1,000,000
b. 810,000
c. 720,000
d. 900,000

Exercises -39 (AICPA Adapted)

Virtue Company provided the following data for the current year:

Merchandise purchased for resale 4,000,000

Freight in 100,000
Freight out 50,000
Purchase returns 20,000
Interest on inventory loan 200,000

What is the inventoriable cost of the purchase?

a. 4,280,000
b. 4,030,000
c. 4,080,000
d. 4,130,000

Exercises -40 (AICPA Adapted)

Kindness Company regularly buys sweaters and is allowed a trade discount of 20% and 10%.
The entity made a purchase on March 20 and received an invoice with a list price of P900,000,
a freight charge of P50,000, and payment terms of net 30 days. The entity should record the
purchase at what amount?
a. 648,000
b. 630,000
c. 698,000
d. 680,000

Exercises -41 (AICPA Adapted)

On June 1, 2013 Compassion Company sold merchandise with a list price of P1,000,000 to a
customer. The entity allowed trade discounts of 20% and 10%. Credit terms were 5/10, n/30
and the sale was made FOB shipping point. The entity prepaid P50,000 of delivery cost for the
customer as an accommodation. On June 11, 2013, what amount is received from the
customer as full remittance?
a. 684,000
b. 734,000
c. 720,000
d. 770,000

Exercises -42 (AICPA Adapted)

Matrix Company records its purchases at gross amount but wishes to change to recording
purchases net of purchase discounts. Discounts available on purchases for the current year
totaled P100,000. Of this amount, P10,000 is still available in the accounts payable balance.
The balances in the accounts as of and for the year ended December 31, before conversions
are:

Purchases 5,000,000
Purchase discounts taken 40,000
Accounts payable 1,500,000

What is the balance of accounts payable on December 31 after the conversion?

a. 1,490,000
b. 1,460,000
c. 1.440,000
d. 1,410,000

Exercises -43 (PHILCPA Adapted)

Matinee Company specializes in the sale of IBM compatibles and software packages. The entity
had the following transactions with one of its suppliers:

Purchases of IBM compatibles 1,700,000

Purchases of commercial software packages 1,200,000
Purchase return and allowance 50,000
Purchase discount taken 17,000

Purchases were made throughout the year on terms 2/10, n/30. All return and allowances
took place within 5 days of purchase and prior to any payment on account. What is the
purchase discount lost?
a. 57,000
b. 40,000
c. 17,000
d. 41,000

Exercises -44 (IAA)

A physical count on December 31, 2013 revealed that Joyous Company had inventory with a
cost of P4,410,000. The following items were excluded from the 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, 2013. The customer was expected to receive the goods on January 5, 2014.
 Merchandise costing P460,000 was shipped by Joyous FOB shipping point to a customer
on December 29, 2013. The customer was expected to receive the goods on January 10,
2014.
 Merchandise costing P830,000 was shipped by a vendor FOB destination on December 31,
 2013 was received by Joyous on January 15, 2014.
 Merchandise costing P510,000 purchased FOB shipping point was shipped by the supplier
on December 31, 2013 and received by Joyous on January 5, 2014.

What amount of inventory should be reported on December 31, 2013?

a. 5,300,000
b. 4,690,000
c. 3,800,000
d. 4,920,000

Exercises -45 (CGAC)

Rigmarole Company used a perpetual inventory system. At the end of 2012, the balance in the
inventory account was P360,000 which included P30,000 of goods purchased FOB shipping
point that did not arrive until 2013. Purchases in 2013 were P3,000,000.the perpetual
inventory records showed an ending inventory of P420,000 for 2013. A physical count of the
goods on hand at the end of 2013 showed an inventory at P380,000. Inventory shortages are
included in cost of goods sold. What amount should be reported for cost of goods sold in 2013?
a. 2,940,000
b. 2,980,000
c. 3,000,000
d. 3,010,000

Exercises -46 (IAA)

Audacity Company counted the ending inventory on December 31, 2013. The entity reported
inventory before any corrections at P2,000,000. None of the following items were included when
the total amount of the ending inventory was computed:

 P150,000 in goods located in the entity’s warehouse that are on consignment from another
entity.
 P200,000 in goods that were sold by the entity and shipped on December 30 and were in
transit on December 31, 2013.
The goods were received by the customer on January 2, 2014. Terms were FOB destination.
 P300,000 in goods that were purchased by the entity and shipped on December 30 and
were in transit on December 31, 2013.
The goods were received by the entity on January 2, 2014. Terms were FOB shipping point.
P400,000 in goods that were sold by the entity and shipped on December 30 and were in
transit on December 31, 2013.
The goods were received by the customer on January 2, 2014. Terms were FOB shipping
point.

What amount of inventory should be reported on December 31, 2013?

a. 2,500,000
b. 2,350,000
c. 2,900,000
d. 2,750,000

Exercises -47 (AICPA Adapted)

Quest Company’s accounts payable on December 31, 2013 was P2,000,000 before considering
the following transactions:

Goods shipped to Quest Company, FOB shipping point on December 20, 2013, from a vendor
were lost in transit. The invoice price was P100,000. On January 5, 2014, Quest Company field
at P100,000 claim against the common carrier.
On December 27, 2013, a vendor authorized Quest Company to return, for full credit, goods
shipped and billed at P50,000 on December 2, 2013. The returned goods were shipped by
Quest Company on December 27, 2013. A P50,000 credit memo was received and recorded by
Quest Company on January 6, 2014.

In the December 31, 2013 statement of financial position, what amount should be reported as
accounts payable?
a. 2,250,000
b. 2,150,000
c. 2,300,000
d. 2,050,000

Exercises -48 (IAA)

On August 1 of the current year, Scuba Company recorded purchases of P800,000 and
P1,000,000 under credit terms of 2/15, net 30. The payment due on the P800,000 purchase
was remitted on August 16. The payment due on the P800,000 purchase was remitted on
August 31. Under the net method and the gross method, these purchases should be included
at what respective amounts in the determination of cost of goods available for sale?
a. 1,784,000 and 1,764,000
b. 1,764,000 and 1,800,000
c. 1,784,000 and 1,784,000
d. 1,800,000 and 1,764,000

Exercises -49 (AICPA Adapted)

Black Company’s accounts payable on December 31, 2013, totaled P900,000 before any
necessary year-end adjustments relating to the following transactions:

On December 27, 2013, Black Company wrote and recorded checks to creditors totaling
P400,000 causing an overdraft of P100,000 in Black Company’s bank account on December
31, 2013. The checks were mailed out on January 10, 2014.

On December 28, 2013, Black Company purchased and received goods for P150,000 terms
2/10, n/30. Black Company records purchases and accounts payable at net amount. The
invoice was recorded and paid January 3, 2014.

Goods shipped FOB shipping point, 5/10, n/30 on December 20, 2013 from a vendor to Black
Company were received January 2, 2014. The invoice cost was P200,000.

On December 31, 2013, what amount should be reported as accounts payable?

a. 1,450,000
b. 1,447,000
c. 1,650,000
d. 1,637,000

Exercises -50 (AICPA Adapted)

Blue Company provided the following for the current year:

Central warehouse Held by consignees

Beginning inventory 1,100,000 120,000
Purchases 4,800,000 600,000
Freight in 100,000
Transportation to consignees 50,000
Freight out 300,000 80,000
Ending inventory 1,450,000 200,000
What is the cost of goods sold for the current year?
a. 4,550,000
b. 4,850,000
c. 5,070,000
d. 5,120,000

Exercises -51 (AICPA Adapted)

White Company’s usual sales terms are net 60 days, FOB shipping point. Sales, net of return
and allowances, totaled P5,000,000 for the year ended December 31, 2013, before year-end
adjustment.

On December 27, 2013, White Company authorized a customer to return, for full credit, goods
shipped and billed at P50,000 on December 15, 2013. The returned goods were shipped by
White Company on January 4, 2014, and a P50,000 credit memo was issued on the same date.

Goods with an invoice amount of P300,000 were billed to a customer on January 3, 2014. The
goods were shipped on December 31, 2013.

Goods with an invoice amount of P300,000 were billed and recorded on December 30, 2013.
The goods were shipped on January 3, 2014.

What amount of net sales should be reported for the current year?
a. 5,050,000
b. 4,950,000
c. 5,250,000
d. 4,750,000

Exercises -52 (PHILCPA Adapted)

Orange Company produced 80,000 kilos of tobacco during the 2013 season. The entity sells all
of its tobacco to a certain customer which has agreed to purchase the entire production at the
prevailing market price. Recent legislation assures that the market price will not fall below
P100 per kilo during the next two years. The costs of selling and distributing the tobacco are
immaterial and can be reasonably estimated. The entity reports its inventory at expected exit
value. During 2013, the entity sold and delivered to the customer 60,000 kilos at the market
price of P100. The entity sold the remaining 20,000 kilos during 2014 at the market price of
P150. What amount of sales revenue should be recognized in 2013?
a. 6,000,000
b. 3,000,000
c. 8,000,000
d. 9,000,000

Exercises -53 (AICPA Adapted)

Purple Company had sales of P4,000,000 during December of the current year. Experience has
shown that merchandise equaling 7% of sales will be returned within 30 days and an
additional 3% will be returned within 90 days. Returned merchandise is readily resalable. In
addition, merchandise equaling 15% of sales will be exchanged for merchandise of equal of
greater value. What amount should be reported for net sales for the month of December?
a. 3,600,000
b. 3,400,000
c. 3,120,000
d. 3,000,000

Exercises -54 (AICPA Adapted)

Yellow Company, a distributor of machinery, bought a machine from the manufacturer in
November 2013 for P500,000. On December 30, 2013, the entity sold this machine for
P750,000, under the following terms 2% discount if paid within 30 days, 1% discount if paid
after 30 days but within 60 days, or payable in full within 90 days if not paid within the
discount periods. However, the customer had the right to return this machine to Yellow
Company if it was unable to resell the machine before expiration of the ninety-day payment
period, in which case the customer’s obligation to Yellow Company would be canceled. In the
net sales for the year ended December 31, 2013, what amount should be included for the sale
of the machine?
a. 750,000
b. 735,000
c. 742,500
d. 0

Exercises -55 (AICPA Adapted)

On October 1, 2013, Indomitable Company sold 100,000 gallons of heating oil at P30 per
gallon. 50,000 gallons were delivered on December 15, 2013, and the remaining 50,000 gallons
were delivered on January 15, 2014. Payment terms were: 50% due on October 1, 2013, 25%
on the first delivery, and the remaining 25% due on the second delivery. What amount of sales
revenue should be recognized during 2013?
a. 3,000,000
b. 1,500,000
c. 2,250,000
d. 750,000

Exercises -56 (IFRS)

On July 1, 2013, Leeway Company, a manufacturer of office furniture, supplied goods to
another entity for P1,200,000 on condition that this amount is paid in full on July 1, 2014. The
customer had earlier rejected an alternative offer from Leeway whereby it could have bought
the same goods by paying cash of P1,080,000 on July 1, 2013. What amount should be
recognized respectively as sales revenue and interest income for the year ended June 30,
2014?
a. 1,080,000 and 120,000
b. 1,200,000 and 120,000
c. 1,080,000 and 0
d. 1,200,000 and 0

Exercises -57 (AICPA Adapted)

On January 1, 2013, Gentle Company contracted with the City of Manila to provide custom
built desks for the city schools. The contract made Gentle the city’s sole supplier and required
the entity to supply no less than 4,000 desks and no more than 5,500 desks per year for two
years. In turn, the City of Manila agreed to pay a fixed price of P550 per desk. During 2013, the
entity produced 5,000 desks for the City of Manila. On December 31, 2013, 500 of these desks
were segregated from the regular inventory and were accepted and awaiting pickup by the City
of Manila. The City of Manila paid Leeway P2,250,000 during 2013. What amount should be
recognized as contract revenue in 2013?
a. 2,250,000
b. 2,475,000
c. 2,750,000
d. 3,025,000

Exercises -58 (IFRS)

Abode Company sold merchandise for P800,000 to a customer on December 31, 2013. The
terms of sale agreement state that payment is due in one year’s time. The entity has an
imputed rate of interest of 9%. The PV of 1 at 9% is .917 for one period. What amount of sales
revenue should be recognized from the transaction?
a. 872,000
b. 733,000
c. 800,000
d. 0

Exercises -59 (AICPA Adapted)

Confident Company had the following transactions in 2013:
 The entity sold goods to a customer for P50,000, FOB shipping point on December 30,
2013.
 The entity sold 3 pieces of equipment on a contract over a three-year period. The sale price
of each piece of equipment is P100,000. Delivery of each piece of equipment is on February
10 of each year. In 2013, the customer paid a P200,000 down payment, and will pay
P50,000 per year in 2014 and 2015. Collectability is reasonably assured.
 On June 1, 2013, the entity signed a contract for P200,000 for goods to be sold on account.
Payment is to be made in two installments of P100,000 each on December 1, 2013 and
December 1, 2014. The goods are delivered on October 1, 2013. Collection is reasonably
assured, and the goods may not be returned.
 The entity sold goods to a customer on July 1, 2013 for P500,000. If the customer does not
sell the goods to retail customers by December 31, 2013, the goods can be returned. The
customer sold the goods to retail customers on October 1, 2014.

What amount of sales revenue should be reported in 2013?

a. 350,000
b. 850,000
c. 450,000
d. 550,000