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    Diy-Problems (Questionnaires)

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    May Ramos
    Here are the journal entries for October 2020 using the retail inventory method: October 1, 2020 Inventory 156,000 Cost of Goods Sold 52,000 Retail Inventory 104,000 To record beginning inventory at retail October (purchases) Inventory 544,000 Cost of Goods Sold 846,000 Accounts Payable 846,000 To record purchases at retail October (freight-in) Inventory 33,200 Freight-in Expense 33,200 To record freight-in at cost October (returns) Accounts Payable 11,200 Inventory 11,200 To

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    Diy-Problems (Questionnaires)

    Uploaded by

    May Ramos
    43 views6 pages
    Here are the journal entries for October 2020 using the retail inventory method: October 1, 2020 Inventory 156,000 Cost of Goods Sold 52,000 Retail Inventory 104,000 To record beginning inventory at retail October (purchases) Inventory 544,000 Cost of Goods Sold 846,000 Accounts Payable 846,000 To record purchases at retail October (freight-in) Inventory 33,200 Freight-in Expense 33,200 To record freight-in at cost October (returns) Accounts Payable 11,200 Inventory 11,200 To

    Original Title

    DIY-PROBLEMS (QUESTIONNAIRES)

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    Here are the journal entries for October 2020 using the retail inventory method: October 1, 2020 Inventory 156,000 Cost of Goods Sold 52,000 Retail Inventory 104,000 To record beginning inventory at retail October (purchases) Inventory 544,000 Cost of Goods Sold 846,000 Accounts Payable 846,000 To record purchases at retail October (freight-in) Inventory 33,200 Freight-in Expense 33,200 To record freight-in at cost October (returns) Accounts Payable 11,200 Inventory 11,200 To

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    43 views6 pages

    Diy-Problems (Questionnaires)

    Uploaded by

    May Ramos
    Here are the journal entries for October 2020 using the retail inventory method: October 1, 2020 Inventory 156,000 Cost of Goods Sold 52,000 Retail Inventory 104,000 To record beginning inventory at retail October (purchases) Inventory 544,000 Cost of Goods Sold 846,000 Accounts Payable 846,000 To record purchases at retail October (freight-in) Inventory 33,200 Freight-in Expense 33,200 To record freight-in at cost October (returns) Accounts Payable 11,200 Inventory 11,200 To

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 6

    Far Eastern University

    Institute of Accounts. Business and Finance


    Department of Accountancy and Internal Auditing

    INTERMEDIATE ACCOUNTING 1
    DO-IT-YOURSELF EXERCISES

    TABLE OF CONTENTS
    • Problem 2.3-1 Various Inventory Issues
    • Problem 2.3-2 Inventory Adjustments
    • Problem 2.3-3 Lower of Cost or Net Realizable Value
    • Problem 2.3-4 Retail Inventory Method
    • Problem 2.3-5 Comprehensive Problem

    1|Page
    Far Eastern University
    Institute of Accounts. Business and Finance
    Department of Accountancy and Internal Auditing

    PROBLEM 2.3-1
    Various Inventory Issues

    The following independent situations relate to inventory accounting:

    1. Kim Company, purchased goods with a list price of P 175,000, subject to trade discounts of 20% and 10%, with
    no cash discounts allowable. How much should Kim Co. Record as the cost of these goods?

    2. Keillor company’s inventory of P 1,100,000 at December 31, 2020 was based on a physical count of goods
    priced at cost and before any year-end adjustments relating to the following items:
    a) Goods shipped from a vendor FOV shipping point on December 24, 2020, at an invoice cost of P 69,000 to
    Keillor Company were received on January 4, 2021.
    b) The physical count included P 29,0000 of goods billed to Sakic Corporation, FOB shipping point on
    December 31, 2020. The carrier picked up these goods on January 3, 2021.

    What amount should Keillor report as inventory on its statement of financial position?

    3. Zimmerman Corp. had 1,500 units of Part MQ on hand on May 1, 2021, costing P 21 each. Purchases of Part
    MQ during May were as follows:

    Units Unit Cost


    May 9 2,000 P 22
    1 3,500 23
    7
    2 1,000 24
    6

    A. A physical count on May 31, 2020, shows 2,000 units of part MQ on hand. Using the FIFO method, what is
    the cost of part MQ inventory at May 31, 2020?
    B. Using the average cost method, what is the inventory cost?

    4. Donovan, Inc., a retail store chain, had the following information in the general ledger for the year 2021:

    Merchandise purchased for resale P 909,400


    Interest in notes payable to vendors 8,700
    Purchase returns 16,500
    Freight-in 22,000
    Freight-out 17,100
    Cash discounts on purchases 6,800

    What is Donovan’s inventoriable costs for 2020?

    Instructions:
    Answer each of the preceding questions about inventories and explain your answers. Write your answer on the
    ANSWER SHEET on next page.

    2|Page
    Far Eastern University
    Institute of Accounts. Business and Finance
    Department of Accountancy and Internal Auditing

    ANSWER SHEET

    No. Answer Explanation


    1

    3A

    3B

    3|Page
    Far Eastern University
    Institute of Accounts. Business and Finance
    Department of Accountancy and Internal Auditing

    PROBLEM 2.3-2
    Inventory Adjustments

    Dimitri Company, a manufacturer of small tools, provided the following information from its accounting records for the
    year ended December 31, 2020:

    Inventory at December 31, 2020 (based in physical count of goods in


    Dimitri’s plant, at cost, on December 31, 2020 P 1,520,000
    Accounts Payable at December 31, 2020 1,200,000
    Net Sales (Sales less sales returns) 8,150,000

    Additional information:
    1. Included in the physical count were tools billed to a customer FOB shipping point on December 31, 2020. These
    tools had a cost of P 31,000 and were billed at P 40,000 The shipment was on Dimitri’s loading dock waiting to
    be picked up by the common carrier.
    2. Goods were in transit from a vendor to Dimitri on December 31, 2020. The invoice cost was P 76,000, and the
    goods were shipped FOB shipping point on December 29, 2020.
    3. Work in process inventory costing P 30,000 was sent to an outside processor for plating on December 30, 2020.
    4. Tools returned by customers and held pending inspection in the returned goods area in December 31, 2020,
    were not included in the physical count. On January 8, 2021, the tools costing P 32,000 were inspected and
    returned to inventory. Credit memos totaling P 47,000 were issued to the customers on the same date.
    5. Tools shipped to a customer FOB Destination on December 26, 2020, were in transit at December 31, 2020, and
    had a cost of P 26,000. Upon notification of receipt by the customer on January 2,2021, Dimitri issued a sales
    invoice for P 42,000.
    6. Goods, with an invoice cost of P 27,000, received from a vendor at 5:00 PM on December 31, 2020, were
    recorded on a receiving report dated January 2, 2021. The goods were not included in the physical count, but the
    invoice was included in accounts payable at December 31, 2020.
    7. Good received from a vendor on December 26, 2020, were included in the physical count. However, the related
    P 56,000 vendor invoice was not included in accounts payable at December 31, 2020, because the accounts
    payable copy of the receiving report was lost.
    8. On January 3, 2021, a monthly freight bill in the amount of P 8,000 was received. The bill specifically related to
    merchandise purchased in December 2020, one-half of which was still in the inventory at December 31, 2020.
    The freight charges were not included in either the inventory or in accounts payable at December 31, 2020.

    Instructions:
    Using the format shown below, prepare a schedule of adjustments as of December 31, 2020, to the initial amounts
    per Dimitri’s accounting records. Show separately the effect, if any, of each of the eight transactions on the December
    31, 2020 amount. If the transactions would have no effect on the initial amount shown, enter NONE.

    Accounts
    Inventory Payable Net Sales

    Initial amounts

    Adjustments – increase (decrease)


    1
    2
    3
    4
    5
    6
    7
    8
    Total Adjustments

    Adjusted amounts

    4|Page
    Far Eastern University
    Institute of Accounts. Business and Finance
    Department of Accountancy and Internal Auditing

    PROBLEM 2.3-3
    LCNRV

    Quartz Company uses the periodic system in accounting for inventory and uses the FIFO method of cost allocation.
    The company made the following data available to you:

    12/31/2019 12/31/2020 12/31/2021


    Cost P 1,000,000 P 1,040,00 P 1,200,000
    0
    LCNRV 960,000 980,000 1,150,000

    Instructions:
    1. Prepare the necessary journal entries at the end of each year using the direct method and allowance method win
    writing down inventory.
    2. Assuming Quartz Company is using the perpetual inventory system, prepare the necessary journal entries at the
    end of each year using the direct method and allowance method win writing down inventory.

    5|Page
    Far Eastern University
    Institute of Accounts. Business and Finance
    Department of Accountancy and Internal Auditing

    PROBLEM 2.3-4
    Retail Inventory Method

    Faruk Corporation uses the retail inventory method to estimate ending inventory for its monthly financial statements.
    The following data pertain to a single department for the month of October 2020.

    Inventory, October 1, 2020 P 104,000


    At cost 156,000
    At retail
    Purchases (exclusive of freight and returns)
    At cost 544,000
    At retail 846,000
    Freight-in 33,200
    Purchase returns
    At cost 11,200
    At retail 16,000
    Markups 18,000
    Markup cancellations 4,000
    Markdowns (net) 7,200
    Normal spoilage and breakage 20,000
    Sales 780,000

    Instructions:
    1. Using the conventional retail approach, prepare a schedule computing estimated LCNRV inventory for October
    31, 2020.
    2. A department store using the conventional retail inventory methods estimates the cost of its ending inventory at
    P 120,000. An accurate physical count reveals only P94,000 of inventory at LCNRV. List factors that may have
    caused the difference between the computed inventory and the physical count.

    6|Page

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