PROBLEM 1
Tinda Hon Company uses the first-in, first-out method in calculating cost of goods sold for the three
products that the company handles. Inventories and purchase information concerning the three
products are given for the month of June:
Product C Product P Product A
Oct. Inventory 50,000 units @₱6.00 30,000 units @ ₱10.00 65,000 units @ ₱0.90
Oct. 1-15 Purchases 70,000 units @ ₱6.50 45,000 units @ ₱10.50 30,000 units @ ₱1.25
Oct. 16-31 Purchases 30,000 units @ ₱8.00
Oct. 1-31 Sales 105,000 units 50,000 units 45,000 units
Oct. 31 Sales price ₱8.00/unit ₱11.00/unit ₱2.00/unit
On October 31, the company’s suppliers reduced their prices form the most recent purchase prices by
the following percentages: product C, 20%; product P, 10%; product A, 8%. Accordingly, Tindahan
decided to reduce its sales price on all items by 10%, effective July 1. Tindahan’s selling cost is 10% of
sales price. Products C and P have a normal profit (after selling costs) of 30% on sales prices, while the
normal profit on product A (after selling cost) is 15% of sales price.
1. How much is the loss on inventory writedown on June?
2. What amount of inventory should be presented in the statement of financial position?
3. How much is the allowance for inventory writedown at October 31?
4. How much is the cost of sales after loss on inventory writedown for the month of October?
PROBLEM 2
FORK N BINS wholesales food products to independent grocery stores. The company uses the perpetual
inventory system and assigns cost to inventory on a first-in, first-out basis. Transactions and other
related information regarding two of the items (baked beans and plain flour) carried by FORK N BINS are
given below for December 2022, the last month of the company’s reporting period.
Baked Beans Plain Flour
Case containing 25 x 410g
Unit of packaging cans Box containing 12 x 4kg bags
Inventory at December
1 350 cases at ₱196 625 boxes at ₱384
Purchases Dec. 1 - 200 cases at ₱195 Dec. 3 - 150 boxes at ₱384.50
Dec. 19 - 470 cases at ₱197 Dec. 15 - 200 boxes at ₱384.50
Dec. 29 - 240 boxes at ₱390
2/10, n/30, FOB Shipping
Purchase terms Point n/30, FOB Destination
December sales 730 cases at ₱285 950 boxes at ₱400
Returns and allowances A customer returned 50 cases As the Dec. 15 purchase was unloaded,
that had been shipped in
error. 10 boxes were discovered damaged. A
The customer's account was credit of ₱3,845 was received by
credited for ₱14,250. FORK N BINS.
Physical count at Dec. 31 326 cases on hand 15 boxes on hand
Explanation of variance No explanation found. Boxes purchased on Dec. 29 still in
Assumed stolen. transit on Dec. 31
NRV at Dec. 31 ₱290 per case ₱385 per case
1. What is the cost of baked beans inventory that was assumed stolen
?
2. What is the cost of plain flour inventory on December 31, 2022?
3. What is the total cost of FORK N BINS’ inventory on December 31, 2022?
4. What amount of loss on decline in value of inventory should be recognized by FORK N BINS at
the end of its reporting period?
