BA 120 QUIZ

Problem 1
The cost of goods sold section of the income statement prepared by your client for the year ended
December 31, 2018 appears as follows:
Inventory, Dec 31, 2017 P 80,000
Purchases 1,600,000
Inventory, Dec 31, 2018 (100,000)
COGS 1,580,000
Although the books have been closed, your working paper trial balance is prepared showing all accounts
with activity during the year. The January 1 and December 31 inventories appearing above were
determined by physical count of the goods on hand on those dates (at night time), and no reconciling items
were considered. All purchases are FOB shipping point.
In the course of your examination of the inventory cutoff, both at the beginning and end of the year, you
discovered the following facts:
Beginning of the year
1. Invoices totaling P 25,000 were entered in the voucher register in January, but the goods were
received during December.
2. December invoices totaling P 13,200 were entered in the voucher register in December, but goods
were not received until January.
End of the year
1. Sales of P 43,000 (cost, P 12,900) were made on account on December 31 and goods were delivered
at that time. However, all the entries relating to the sales were made on January 2.
2. Invoices totaling P 15,000 were entered in the voucher register in January, but the goods were
received in December.
3. December invoices totaling P 18,000 were entered in the voucher register in December, but the
goods were not received until January.
4. Invoices totaling P 12,000 were entered in the voucher register in January, and the goods were
received in January; but the invoices were dated December.
Based on the preceding information, and using the best available information, determine the net
adjustment that should be made for each of the following accounts (ignoring tax effects):
a. Retained earnings, ending [3 pts]
b. Purchases [3 pts]
c. Beginning inventory [3 pts]
d. Ending inventory [3 pts]
e. Accounts receivable [3 pts]
f. Sales [3 pts]
g. Cost of goods sold [4 pts]

Problem 2
On June 5, 2018, Rapier Company bought three units of inventories for a lump-sum price of P 1,200,000.
The company assigned the total purchase price equally among the three items. However, the relative
selling prices at point of purchase are as follows: Inventory A – P 500,000; Inventory B – P 700,000; and
Inventory C – P 800,000. On August 8, 2018, the company sold Inventory B for P 700,000. The company is
using the perpetual inventory system in accounting for inventories. The reported net income for 2018 (after
a 30% tax rate) is P 5,000,000. Using the best inventory costing method applicable in the circumstances,
compute for the correct/adjusted net income after tax. [5 pts]
Problem 3
Hyperstone, Inc. was organized on January 1, 2011. On December 31, 2012, the company lost most of its
inventory in a warehouse fire just before the year-end count of inventory was to take place. The company’s
records disclosed the following data:
2011 2012
Inventory, January 1 P 0 P 204,000
Purchases 860,000 692,000
Purchase returns and allowances 43,120 64,600
Sales 788,000 836,000
Sales returns and allowances 16,000 20,000

On January 1, 2012, Hyperstone’s pricing policy was changed so that the gross profit rate would be three
percentage points higher than the one earned in 2011. Salvaged undamaged merchandise was marked to
sell at P 24,000 (using 2012 gross profit rate), while damaged merchandise marked to sell at P 16,000 had
an estimated realizable value of P 3,600.
Note: GP rate must be rounded to the nearest whole number (e.g. 35%).
a. What is the company’s gross profit rate beginning January 1, 2012? [4 pts]
b. How much is the inventory fire loss? [4 pts]

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