Inventories Quiz 2

INVENTORIES
Quiz 2
1. ABS-CVM Supermart’s inventory records show the following information at
December 31, 2020.
Cost Retail
Inventory, January 1 56,000 140,000
Sales 1,000.000
Purchases 496,000 1,032,000
Freight in 15,000
Markup 100,000
Markup cancellation 12,000
Markdown 50,000
Estimated normal shrinkage is 2.5% of sales 10,000
ABS-CVM uses the retail inventory method in estimating the value of its
inventory. The estimated inventory at December 31, 2020 at approximate
lower of average cost or market retail is
a. 46,000
b. 87,750
c. 99,000
d. 107,250
2. NTZ Company uses the conventional retail inventory method to account for
inventory. The following information relates to 2020 operations:
Cost Retail
Beginning inventory and purchases 600,000 920,000
Net markups 40,000
Net markdowns 60,000
Sales 780,000
What amount should be reported as cost of sales for 2020?
a. 480,000
b. 487,500
c. 520,000
d. 525,000
3. On January 1. 2020. the stock inventory of LHUGI Store was P100,000 at
retail and P56,000 at cost. During the year, the store registered the following
purchases:
Cost 400,000
Retail price 620,000
Original markup 220,000
The total net sales was P540,000. The following reductions were made in the
retail price:
To meet price competition 5,000

To dispose of overstock 3,000
Miscellaneous reductions 12,000
During the year, the selling price of a certain inventory increased from P20 to
P30. This additional markup applied to 5,000 items but was later canceled on
the remaining 1,000 items. What is the inventory on December 31, 2020
using the retail method?
a. 200,000
b. 240,000
c. 144,000
d. 120,000
4. AYUDA Company has determined its December 31, 2020, inventory on a

FIFO basis to be P400,000. Information pertaining to that inventory follows:
Estimated selling price 408,000

Estimated cost of disposal 20,000
Normal profit margin 60,000
Current replacement cost 360,000
a. 400,000
b. 388,000
c. 360,000
d. 328,000
5. The following information pertains to an inventory item:

Cost 120
Estimated setting price 136
Estimated disposal cost 2
Normal gross margin 22
Replacement cost 109
Under the lower of cost or net realizable, this inventory item should be valued
at
a. 134
b. 120
c. 112
d. 109
6. CO-BETH Company’s accounting records indicated the following for 2020:
Inventory, January 1 P6,000,000

Purchases 20,000,000
Sales 30,000,000
A physical inventory taken on December 31, 2020 resulted in an ending

inventory of P4,500,000. The gross profit on sales remained constant at
30% in recent years. CO-BETH suspects some inventory may have been
taken by a new employee. At December 31, 2020 what is the estimated
cost of missing inventory?
a. P5,000,000 c. P500,000
b. P4,500,000 d. P 0
7. The TUTONG Corporation was organized on January 1, 2019. On

December 31, 2020, the corporation lost most of its inventory in a warehouse
fire just before the year-end count of inventory was to take place. Data from
the records disclosed the following:
2019 2020
Beginning inventory, January 1 P 0 P1,020,000
Purchases 4,300,000 3,460,000
Purchases returns and allowances 230,600 323,000
Sales 3,940,000 4,180,000
Sales returns and allowances 80,000 100,000
On January 1, 2020, the Corporation’s pricing policy was changed so that

the gross profit rate would be three percentage points higher than the one
earned in 2019.
Salvaged undamaged merchandise was marked to sell at P120,000 while

damaged merchandise was marked to sell at P80,000 had an estimated
realizable value of P18,000.
How much is the inventory loss due to fire?

a. P918,200 c. P856,200
b. P947,000 d. P824,600
8. The work-in-process inventory of CORONA Company were completely
destroyed by fire on June 1, 2020. You were able to establish physical
inventory figures as follows:
January 1, 2020 June 1, 2020
Raw materials P 60,000 P120,000
Work-in-process 200,000 -
Finished goods 280,000 240,000
Sales from January 1 to May 31, were P546,750. Purchases of raw

materials were P200,000 and freight on purchases, P30,000. Direct labor
during the period was P160,000. It was agreed with insurance adjusters
than an average gross profit rate of 35% based on cost be used and that
direct labor cost was 160% of factory overhead.
The work in process inventory destroyed as computed by the adjuster

a. P314,612 c. P185,000
b. P366,000 d. P265,000
9. BAKUNA Company sells its merchandise at a gross profit of 30%. The

following figures are among those pertaining to BAKUNA’s operations for the
six months ended June 30, 2019.
Sales 200,000
Beginning inventory 50,000
Purchases 130,000
On June 30, 2020, all of BAKUNA’s inventory was destroyed by fire. The
estimated cost of this destroyed inventory was
a. 120,000
b. 70,000
c. 40,000
d. 20,000
10. CDOCompany’s accounting records indicated the following information:

Inventory, 1/1/20 500,000
Purchases during 2020 2,500,000
Sales during 2020 3,200,000
A physical inventory taken on December 31, 2020, resulted in an ending

inventory of P575,000. Dart’s gross profit on sales has remained constant at
25% in recent years, CDO suspects some inventory may have been taken by
a new employee. At December 31, 2020, what is the estimated cost of
missing inventory?
a. 25,000
b. 100,000
c. 175,000
d. 225,000

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INVENTORIES

What amount should be reported as cost of sales for 2020?

To meet price competition 5,000

4. AYUDA Company has determined its December 31, 2020, inventory on a

Estimated selling price 408,000

5. The following information pertains to an inventory item:

Inventory, January 1 P6,000,000

A physical inventory taken on December 31, 2020 resulted in an ending

7. The TUTONG Corporation was organized on January 1, 2019. On

On January 1, 2020, the Corporation’s pricing policy was changed so that

Salvaged undamaged merchandise was marked to sell at P120,000 while

How much is the inventory loss due to fire?

Sales from January 1 to May 31, were P546,750. Purchases of raw

The work in process inventory destroyed as computed by the adjuster

9. BAKUNA Company sells its merchandise at a gross profit of 30%. The

10. CDOCompany’s accounting records indicated the following information:

A physical inventory taken on December 31, 2020, resulted in an ending

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