Victory Enterprises Goods shipped to customer on Dec 31, 2010 presumed in transit, FOB Goods in transit, shipped by a supplier FOB shipping point __ 51,000... Inventories and Related Ex
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Inventories and Related Expenses
MULTIPLE CHOICE - THEORY
Problem 4 (Goodwill Company)
16,000 + 13,200 + 26,100 + 19,200 + 14,300 = 88,800
16,000 + 6,200 = 22,200
or two separate entries for purchases and inclusion in ending inventory
Problem 2 (Victory Enterprises)
Goods shipped to customer on Dec 31, 2010 (presumed in transit), FOB
Goods in transit, shipped by a supplier FOB shipping point 51,000
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Inventories and Related Expenses
Problem 3 (Raindrops Company)
(a) Correct inventory, November 30 55,000
Correct inventory level, December 31 35,000
(b) Adjusting entries:
Cost of Sales (unrecorded purchases) 1,260,000
14,000 x 90 = P1,120,000
Problem 4 (Bulls Company)
(a) Net adjustment to Inventory = 21,096 nei debit (See audit adjustments)
(b) Adjusting entries
5,841 + 7,922 + 2,010
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Inventories and Related Expenses
Miscellaneous Receivables (from Carrier) 12,600
Problem 5
Inventory Accts Payable Net Sales
St
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Problem 6 (Firenze Fashions)
General Ledger Physical Count
Audit Adjustments
Problem 7
No entry on the P100,000 shipment
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Chapier 5
Inventories and Related Expenses
Problem 8 (Maligaya Corporation)
Overall Gross Profit Ratio
Net Purchases 2011 and 2012 (2,800,000 + 2,350,000) 5!
Sales - 2011 and 2012 (6,300,000 + 3,900,000) P 9,200,000
Inventory Fire Loss
Add: Purchases January 1 to April 15, 2013
April 1 to 15
Less; Cost of goods sold, January 1 to April 15
Accounts Receivable, April 15 P 360,000
Accounts Receivable, March 31 4(
Sales, January 1 to March 31 1,350,000
Sales, January 1 to April 15 P1,510,000
Proceeds from sale of damaged goods (lower than cost) 30,000 53,000
Problem 9 (Billy Corporation)
11 months ended May | Year ended June 30
31
Less Inventory, May 31, 2013 (950,000 - 55,000) 895,000
Cost of goods sold July 1, 2011 to May 31, 2013 P6,720,000
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Gross profit 8,400,000 — 6,720,000 =
Gross profit ratio = 1,680,000/ 8,400,000
(b) Sales in June at normal selling price
(P9,600,000 - 8,400,000) - 100,000 Cost ratio z
Cost of goods sold in June at normal selling price
Cost of merchandise sold at cost
Cost of goods sold in June
() Inventory, May 31 2012
Purchases in June (8,020,000 - 6,740,000)
Goods available for sale
Cost of goods sold in June
Inventory, June 30
Inventory, July 1, 2014
Purchases July 1, 2011 - June 30, 2012
Total goods available for sale
Cost of goods sold (9,600,000 - 100,000) x 80% =7,600,000
100,000 Inventory, June 30, 2012
Problem 10 (Chi Fi Fai)
Audit Adjusting Entries:
Accounts Receivable
Sales Cost of Sales (50,000 x 80/420)
Inventory Other Operating Expenses ~ Loss frorn Inventory Contamination
Cost of Sales Cost of Sales
Accounts Payable
50,000
50,000 33,333
33,333 300,000
800,000
36,000 (The company credited Cost of Sales on December 29 to adjust the stock cards inventory to
inventory list, per physical count.)
Decline in Net Realizable Value of inventory
Allowance to Reduce Inventory to Net Realizabie Value Cost of Sales (400,000 - 80,000)
Accounts Payable
90,000
90,000 320,000
320,000 (1.) Inventory is overstated by P33,333 as a result of goods out on consignment
(2.) The Accounts Receivable is understated by Pš0,000, as a result of goods out on consignment
(3.) The net income is understated by P16,667, as a result of goods out on consignment
(4.) The accounts payable shall be increased by P320,000
(5.) The gross profit is increased by P80, 000, which in effect is the commission income
(6.) Inventory at cost, per audit = P890,000 - P33,333 = 856,667
(7.) The inventory shall be presented at P766,667, which is the cost of 856,667 reduced by the allowance for decline in net realizabie value of P90,000
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Inventories and Related Expenses
Problem 11 (Global Company)
Audit Adjustments
Selling and Administrative Expenses
Receivables from Employees
Petty Cash Fund
Cash in Banks - BDO
Vatue Added Tax Payable
Notes Payable - Bank
Interest Expense
Cash in Banks - Asian Bank
Selling and Administrative Expenses
Cash in Banks ~ BPI
Equipment Acquisition Fund
Cash in Banks - PNB
Allowance for Doubtful Accounts
Accounts Receivable (70% x 240,000)
Finished Goods Inventory
Cost of Sales
200,000 x 60% x 50% = 60,300 Sales
Accounts Receivable 60,000 / 80%
Inventory of Spoiled Goods end Scrap Materials
Cost of Sales
Work in Process Inventory
Inventory of Spoiled Goods and Scrap Materials
Cost of Sales
Selling and Administrative Expenses
Allowance for Doubtful Accounts
Accounts receivable, per client Adjustments
Balance per audit Account of Blue Ridge 240,000 - 168,000 Remaining accounts Provision rate on remaining Required Allowance for D A
Balance of allowance 170,000 - 168,000 Additional doubtful accounts expense P 182,250
16,000 1,500 32,000
50,000 18,000
200 1,100,000
17,500 32,000 68,000
200 1,100,000 168,000 60,000 75,000
42,000 38,000 55,000 182,250
168,000 60,000 75,000
80,000 55,000 152,250
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(3) Cash on deposits with Security Bank = 350,009 - 50,000 P300,000
(4) Cash on deposits with Banco de Oro = (12,000) + 32,000 P 20,000
(7) _ Total Cash in Bank - Current Assets = 332,000 + 300,000 + 20,000 + 199,800 = P851,800
(14) Inventory of Spoiled Goods and Scrap Materials = 80,000 + 42,000 + 55,000 P177,000
(18) Cost of Sales = 4,200,000 ~ 60,000 + 38,000 - 55,000 P4,123,000
(17) Selling and Administrative Expenses = 500,000 + 16,000 + 200 + 152,250 P668,450
(19) Interest Expense and Finance Costs = 200,000 + 18,000 P218,000
MULTIPLE CHOICE - PROBLEMS
3 Inventory = 1,512,500 + 68,750 + 54,375 — 159,375 + 32,500 P4,508,750
4 ~ Recounts Payable = 4,050,250 + 93 100 + 4,375 - 43,750 1,153,975
Cost ratio = 46,800 / 89,800 = 67% :
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Inventories and Related Expenses
Ending inventory at retail
Cost ratio
Inventory, December 31
Inventory, December 31, 2011
Purchases 1,410,000 + 10,000 - 20,000
Goods available for sale
Cost of goods sold
Accounts receivable, December 31 Collections
Accounts receivable, January 1 Sales on account
Cash sales Total sales Cost ratio Ending inventory before shortage
Inventory, per count
Inventory shortage
{tems 8 and 9
Overhead = 25% x P900,000 =
Direct labor cost = P225,000/75%
Direct materials 900,000 - 225,000 - 300,000
Total manufacturing cost
Let x be the ending work in process inventory
6 xis the beginning inventory
.ôx + 900,000 - x = 800,000
100,000 = 4x
x= 250,000
Sales per client
Returned goods
Goods shipped in December
Goods shipped in January
Correct sales
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P 300,000 1,800,000 250,000) 1,850,000
~-350,000 2,200,000
—— 60%
Per audit:
225,000 300,000 375,000
900/000
P9,800 67%
P 320,000 1,400,000 1,720,000
Per client Adjustment
2,300,000 (50/000) 80,000
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Items 11 through 14
Inventory | Accounts Payable Sales | Effect on Cost of
Sales
| Per client i 4,250,000 1,000,000 9,000,000
urchases and included in inventory_ _
Parts sold stil included in inventory (22,000)
22,000
(210,000)
| Shipping point
Freight bill, unrecorded, relating to 2,000 2,000
unsold goods
Items 15 through 18
Sales Net income
(12,150)
18,200
P(7,390)
20 Average cost of purchases 32.60 + 32.60 x 0.10 (11 months) P3315
2
21 Units in the beginning inventory 199,875 / 32.50 6,150
Valued as follows
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Inventories and Related Expenses
TIGER CORPORATION Per count
Petty cash vouchers
Advances to Officers and Employees
Cashier’s accountability
Collections
December collection P1 3500
Cash in Bank
Unrecorded and undeposited collections (see above) 1,500 1,500
Unreleased checks
5,750 Stale checks
4,280 Outstanding checks (22,630 — 5,750 - 4,280) (12,600)
Uncollected note from Sergio Garcia
(3,708)
Sales
8,000
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inventories
Cost of Sales
Sales
Accounts Receivable
Accounts Receivable
Sales
Cost of Sales
Inventories
Allowance for Doubtful Accounts
Selling and Administrative Expenses
Accounts Receivable
Per client
Adjustments
Per Audit
Provision rate for uncollectibles
Required allowance
Existing allowance
Deductions from uncollectible accounts expense
Notes Receivable
Notes Payable
Interest Expense
Interest Payable
10,000 x 22% x 30/360 = 183 Interest Receivable
Interest Income
20,000 x 18% x 77/360 = P770 15,000 x 20% x 59/360 = 492 8,000 x 15% x 46/360 = _153
Income Tax Payable
Income Tax Expense
35,065 — 32,135 = 3,127
60
7,500 10,000 12,600 10,200
47
7,500 10,000 12,000 10,200
47
P328,300
( 1,500)
6,558
10,000
183
1415
2,930
(8,000) (10,000) 12,000 P327,358 5%
P 16,368
16,415
Ee
10,000
183
1,415
2,930
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Inventories and Related Expenses
Answers:
Ị Petty Cash
2 Cash in bank
3 Accounts receivable
4 Allowance for doubtful accounts
5 Notes receivable
6 Interest receivable
Tì Merchandise inventory
8 Receivables from officers and Employees
9 Accounts payable
10 Notes payable
At Interest Payable
12 Income tax payable
13 Sales
14 Cost of sales
15 Selling and administrative expenses
16 Bad debts expense
17 Interest income
18 Interest expense and bank charges
19 Net income
20 Total assets
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P5,500 252.342 327,358 16,368 43,000 1,415 221,300 12,840 397,030 73,070 11,363 10,162 1,869,000 1,184,709 530,300 12,553 9,820 56,703 72,838 2,224,430