INVENTORIES - PROBLEM

1. Carl Company regularly buys merchandise from Ryan Company and is allowed trade
discounts of 20% and 10% from the list price. Carl made a purchase on March 20, 2019,
and received an invoice with a list price of P150,000, a freight charge of P2,500, and a
payment terms of net 30 days. What is the total cost of merchandise purchases?
a. 152,500
b. 110,500
c. 147,500
d. 105,500
Answer: B

2. Ponggay Inc. had 10,200 units on April 2019, based on physical count of goods on that
day. The following items have not yet been recorded as purchases and sales as of April
30:
No. Transaction Terms Number of Units
1 Purchase FOB Shipping Point 250
2 Purchase FOB Destination 300
3 Sale FOB Shipping Point 650
4 Sale FOB Destination 500
Items 1-4 were shipped by the seller, April 30, 2019 and received by the buyer on May 5,
2019. How many units should be considered as inventory at the end of April 2019? A
a. 10,950
b. 1,700
c. 11,900
d. 10,750
Answer: A
3. The Era Trading’s inventory at the end of 2019 is P9,500,000, before considering the
following information. Included in the amount are the following items:
 Merchandise in transit, purchased FOB shipping point, P680,000.
 Merchandise in Transit, FOB Destination, with invoice cost of P420,000.
 Goods held on consignment, P500,000.
 Goods sold on consignment, at cost plus 50% markup on cost plus P10,000
delivery charge, P610,000.
The P9,500,000 balance does not include the following items:
 Merchandise in Transit to customers, FOB Shipping Point, at selling price of
P540,000, which includes a 40% markup on selling price.
 Merchandise in Transit to customers, FOB Destination at selling price of P400,000,
which includes a 40% markup on selling price.
 Merchandise purchased in transit, FOB shipping point costing P150,000.
 Merchandise sold in transit, Cost, Insurance, Freight charged to the buyer, with
selling price of P180,000 and cost of P120,000.
What is the correct amount of inventory?
a. P8,770,000
b. P11,010,000
c. P9,890,000
d. 9,110,000
Answer: A

4. The physical inventory on December 31, 2019of Christine Co. showed merchandise at
P172,000. You discovered that the following items were excluded from this amount:
 Merchandise costing P31,500 shipped by a vendor FOB shipping point on
December 31, 2019 and received by Christine on January 5, 2020.
 Merchandise costing P40,000 shipped by a vendor FOB destination on December
30, 2019 and received by Christine on January 4, 2020.
 Merchandise costing P12,500 which was shipped FOB destination to a customer
on December 29, 2019. The customer expected to receive the merchandise on
January 6, 2020.
 Merchandise costing P28,500 which was shipped FOB shipping point to a
customer on December 29, 2019. The goods are scheduled to arrive at the
destination point on January 2, 2020.
What is the correct amount of inventory that should appear on Christine’s December 31,
2019 statement of financial position?
a. P284,500
b. P103,500
c. P216,000
d. P128,000
Answer: C

5. Centerpoint Inc. is preparing its 2019 year-end financial statements. Prior to any
adjustments, inventory is valued at P562,500. The following information has been found
relating to certain inventory transaction.
a. Goods values at P110,000 are on consignment with a customer. There goods are not
included in the P562,5000 inventory figure.
b. Goods costing P27,000 were received from a vendor on January 5, 2020. The related
invoice was received and recorded on January 12, 2020. The goods were shipped on
December 31, 2019 terms FOB shipping point.
c. Goods costing P85,000 were shipped on December 31, 2019, and were delivered to
the customer on January 12, 2020. The terms of the sale were FOB Shipping point. The
goods were included in ending inventory of 2019, even though the sale was recorded also
in 2019.
d. A P35,000 shipment of goods to a customer on December 31, 2019, terms FOB
Destination was not included in the year-end inventory. The goods cost P26,000 and were
delivered to the customer on January 8, 2020. The sale was properly recorded in 2020.
e. An invoice for goods costing P35,000 was received and recorded as a purchase on
December 31, 2019. The related goods, shipped FOB destination, were received on
January 2, 2020 and thus were not included in the physical inventory.
f. Goods valued at P65,000 are on consignment from a vendor. These goods are not
included in the year-end inventory figure.
g. A P60,000 shipment of goods to a customer on December 30, 2019, terms FOB
destination was recorded as a sale in 2019. The goods, costing P37,000 and received by
the customer on January 6, 2020, were not included in 2019 ending inventory.

Determine the correct inventory amount to be reported on Centerpoint Inc.’s statement of

financial position at December 31, 2019.

a. 762,500
b. 562,500
c. 447,500
d. 677,500
Answer: D

6. Based on a physical inventory taken on December 31, 2019, City Company determined
its chocolate inventory on a FIFO basis at P26,000. City estimated that, after further
processing costs of P12,000, the chocolate could be sold as finished candy bars for
P40,000. City’s normal profit margin is 10% of sales.

Under the lower of cost and net realizable value rule, what amount should City Company
report as chocolate inventory on its December 31, 2019 statement of financial position?

a. 12,000
b. 28,000
c. 26,000
d. 40,000
Answer: C

7. De Leon Company had 150,000 units of product A on hand at January 1, costing P21
each. Purchases of product A during the month of January were:
Units Unit Cost
January 10 200,000 22
18 250,000 23
28 100,000 24

A physical count on January 31 shows 250,000 units of Product A on hand. What is the
cost of the inventory on January 31 under the FIFO method?

a. 5,850,000
b. 5,550,000
c. 5,250,000
d. 5,350,000
Answer: A
8. Carl Company used the perpetual system. The following information has been
extracted from the records about one product:
UNITS UNIT COST TOTAL COST

Jan. 1 Beginning Balance 8,000 70.00 560,000

6 Purchase 3,000 70.50 211,500
Feb. 5 Sale 10,000
Mar 5 Purchase 11,000 73.50 808,500
Mar 8 Purchase Return 800 73.50 58,800
Apr. 10 Sale 7000
Apr. 30 Sale Return 300

If the FIFO cost flow method is used, what is the cost of the inventory on April 30?
a. 330,750
b. 315,000
c. 433,876
d. 329,360
Answer: A

9. Mildred Company is a wholesaler of office supplies. The FIFO periodic inventory is

used. The entity reported the following activity for inventory of calculators during the
month of August:
UNITS COST
August1 Inventory 20,000 36.00
7 Purchase 30,000 37.20
12 Sale 36,000
21 Purchase 48,000 38.00
22 Sale 38,000
29 Purchase 16,000 38.60
What is the ending inventory on August 31?
a. 1,500,800
b. 1,501,600
c. 1,522,880
d. 1,529,600
Answer: D
10. Trishia Company provided the following inventory card during February:
Purchases Unit Balance
Price Units Used Units
Jan. 10 100 20,000 20,000
31 10,000 10,000
Feb. 8 110 30,000 40,000
9 return from factory (Jan. 10 lot) (1,000) 41,000
28 11,000 30,000
Using the weighted average method, what is the cost of inventory on February 28?
a. 3,170,000
b. 3,180,000
c. 3,520,000
d. 3,700,000
Answer: B

11. During the month of January, Darwin Company which used a perpetual inventory
system recorded the following information pertaining to inventory:

Units Unit Cost Total Cost Units on hand

Balance on 1/1 10,000 100 1,000,000 10,000
Purchased on 1/7 6,000 300 1,800,000 16,000
Sold on 1/20 9,000 7,000
Purchased 1/25 4,000 500 2,000,000 11,000

Under the moving average method, what amount should Darwin report on inventory on
January 31?
a. 2,640,000
b. 3,225,000
c. 3,300,000
d. 3,900,000
Answer: B

12. Frey Company recorded the following data pertaining to raw material during the month
of January:
UNITS
Date Received Cost Issued On Hand
1/1 Inventory 200 8,000
1/8 Issue 400 4,000
1/20 Purchase 12,000 240 16,000

What is the moving average unit cost of the inventory on January 31?
a. 220 b. 224 c. 230 d.240
Answer: C
13. Celine Company provided the following data relating to an inventory item.
Units Unit Cost Total Cost
Jan. 1 Beginning Balance 5,000 200 1,000,000
10 Purchase 5,000 250 1,250,000
15 Sale 7,000
16 Sale Return 1,000
30 Purchase 16,000 150 2,400,000
31 Purchase Return 2,000 150 300,000
Under the perpetual system, what is the moving average unit cost om January 31?
a. 167 b. 165 c. 181 d. 225
Answer: C

14. Fortich Company provided the following assets in a forest plantation and firm:
Freestanding Trees 5,000,000
Land under trees 600,000
Rods in Forest 300,000
Animals related to recreational activities 1,000,000
Bearer plants 1,500,000
Bearer animals 2,000,000
Agricultural produce growing a bearer plants 800,000
Agricultural produce harvested 1,200,000
Plants with dual use 1,400,000
What total amount should be reported as biological assets?
a. 7,800,000
b. 7,200,000
c. 8,400,000
d. 9,200,000
Answer: D

15. Maria Company provided the following data:

Value of Biological Asset at Acquisition Cost on Dec. 31, 2018 600,000

Fair Valuation surplus on initial recognition at fair value on Dec 31, 2018 700,000
Change in Fair Value on Dec 31, 2019 due to growth and price fluctuation 100,000
Decrease in Fair Value due to harvest in 2019 90,000

What is the carrying amount of the biological asset on December 31, 2019?
a. 1,400,000
b. 1,310,000
c. 1,300,000
d. 1,490,000
Answer: B
16. Clarisse Company is engaged in raising dairy livestock. The entity provided the
following information during the current year:

Carrying amount on January 1 5,000,000

Increase due to purchase 2,000,000
Gain arising from change in fair value less cost of disposal
attributable to price change 400,000
Gain arising from change in fair value less cost of disposal
Attributable to physical change 600,000
Decrease due to sales 850,000
Decrease due to harvest 200,000

What is the carrying amount of the biological asset on December 31?

a. 6,950,000
b. 6,000,000
c. 8,000,000
d. 7,150,000
Answer: A

17. Andrea Company produced milk for sale to local and national ice cream producers.
The entity began operations at the beginning of current year by purchasing 650 milk cows
for P8,000,000. The entity provided the following information for the current year:

Acquisition cost, January 1 8,000,000

Change in fair value due to growth and price change 2,500,000
Decrease in fair value due to harvest 250,000
Milk harvested during the year but not yet sold 400,000

What amount of gain on change in fair value should be recognized for biological asset in
the current year?
a. 2,500,000
b. 2,250,000
c. 2,900,000
d. 2,650,000
Answer: B

18. On January 1, 2013, Shairine Company planted trees on its land. The entity
purchased the land two years ago at a cost of P1,000,000. The trees were considered
bearer plants and had accumulated cost of P500,000 on December 31, 2017. By January
1, 2018, the trees had matured and were expected to bear produce for a period of 5 years.
On December 31, 2018, the trees produced fruit and the fair value less cost of disposal
on such date was P50,000. There was no harvest during 2018. On December 31, 2019,
the fruits were harvested and the fair value less cost of disposal on such date was
P75,000. What is the carrying amount of the biological asset on December 31, 2018?

a. 550,000
b. 450,000
c. 50,000
d. 0
Answer: C

19. Lorraine Company is a producer of coffee. The entity is considering the valuation of
harvested coffee beans. Industry practice is to value the coffee beans at market value
and uses as reference a local publication “Accounting for Successful Farms”. On
December 31, 2018, the entity has harvested coffee beans costing P3,000,000 and with
fair value less cost of disposal of P3,500,000 at the point harvest. Because of long aging
and maturation process after harvest, the harvested coffee beans were still on hand on
December 31, 2019. On such date, the fair value less cost of disposal is P3,900,000 and
the net realizable value is P3,200,000. What is the measurement of the coffee beans
inventory on December 31, 2019?

a. 3,000,000
b. 3,500,000
c. 3,200,000
d. 3,900,000
Answer: C

20. Alex Company provided the following data for the current year:

Inventory- January 1:
Cost 3,000,000
Net Realizable Value 2,800,000
Net Purchases 8,000,000
Inventory- December 31:
Cost 4,000,000
Net Realizable Value 3,700,000

What is the amount should be reported as cost of goods sold?

a. 7,000,000
b. 7,100,000
c. 7,300,000
d. 7,200,000
Answer: B

21. If the merchandise costs P6,000, insurance in transit costs P500, tariff costs P50,
processing the purchase order by the purchasing department costs P35, and the
company receiving dock personnel costs P15, what is the total cost charged to the
merchandise?
a. 6,000
b. 6,500
c. 6,550
d. 6,600
Answer: C

21. If the cost of an item of inventory is P50, the current replacement

cost is P45, and the sales price is P65, the amount included in
inventory according to the lower of cost or market is:
a. 20
b. 65
c. 50
d. 45
Answer: D

22. A physical count of the inventory on August 31 reveals that there

are 500 units on hand. Using a FIFO cost flow assumption, the
value of the ending inventory on August 31 is:
a. P2,730
b. P5,670
c. P5,160
d. P3,240
Answer: D

23. A physical count of the inventory on August 31 reveals that there are 500 units on
hand. Using the average cost method, the cost of goods sold for August is:
a. P5,400
b. P8,400
c. P2,300
d. P3,000
Answer: D

24. Cole, Inc. uses perpetual inventory procedures and made the following sales and
purchases during the month of September:
September 1 Balance 200 units P150/unit
September 5 Sold 110 units
September 8 Purchased 400 units P155/unit
September 10 Sold 320 units
September 15 Purchased 400 units P160/unit
September 20 Sold 240 units
September 25 Sold 230 units
September 30 Purchased 300 units P165/unit
A physical count of the inventory on September 30 reveals that there are 400 units on
hand. Using a FIFO cost flow assumption, the value of the ending inventory on August
31 is:
a. P60,000
b. P66,000
c. P65,500
d. P64,550
Answer: C
25. Bill Inc.'s correct ending balance for the inventory account at the end of 2012 should
be P5,000, but the company incorrectly stated it as P3,000. In 2013, Bill correctly
recorded its ending balance of the inventory account. Which one of the following is true?
a. Gross profit is overstated by P2,000 in 2012.
b. Retained earnings are understated by P2,000 in 2013.
c. Gross profit is overstated by P2,000 in 2013.
d. Cost of goods sold is understated by P2,000 in 2012.
Answer: C

26. Inventory records for Dunbar Incorporated revealed the following:

Date Transaction Number of Units Unit Cost
Apr. 1 Beginning Inventory 500 2.40
Apr. 20 Purchase 400 2.50
Dunbar sold 700 units of inventory during the month. Ending inventory assuming
weighted-average cost would be (round weighted-average unit cost to four decimals if
necessary):
a. P502
b. P490
c. P489
d. P480
Answer: C

27. The Alpha Company uses a periodic inventory system. The beginning balance of
inventory and purchases made by the company during the month of July, 2016 are
given below:
 July 01: Beginning inventory, 500 units @ P20 per unit.
 July 18: Inventory purchased, 800 units @ P24 per unit.
 July 25: Inventory purchased, 700 units @ P26 per unit.
The Alpha company sold 1,400 units during the month of July. Compute cost of goods
sold for the month of July using following inventory costing FIFO method.
a. 31,800
b. 37,400
c. 47,000
d. 10,000
Answer: A

28. The Alpha Company uses a periodic inventory system. The beginning balance of
inventory and purchases made by the company during the month of July, 2016 are
given below:
 July 01: Beginning inventory, 500 units @ P20 per unit.
 July 18: Inventory purchased, 800 units @ P24 per unit.
 July 25: Inventory purchased, 700 units @ P26 per unit.
The Alpha company sold 1,400 units during the month of July. Compute the cost of
ending inventory for the month of July using following inventory costing weighted
average method.
a. 47,200
b. 14,220
c. 2,000
d. 33,180
Answer: B

29. Malik Company uses a periodic inventory system. The beginning inventory of a
particular product, and the purchases during the current year, were as follows:

Jan. 1 Beginning inventory 60 units @ P105= P6,300

Mar. 8 Purchase 30 units @ P115= 3,450
Aug 11 Purchase 90 units @ P125= 11,250
Oct. 23 Purchase 20 units @ P135= 2,700
Total available for sale 200 units P23,700
At December 31, the ending inventory of this product consisted of 55 and selling price
during year was P150. Using periodic costing procedures, determine the cost of the year-
end inventory under each weighted average of the flow assumptions?
a. 0
b. 17,182.5
c. 23,700
d. 6,517.5
Answer: D

30. On December 26, 2011, Branigan Company purchased goods costing P1,000,000.
The terms were FOB Shipping point. The goods were received on December 28, 2011.
Costs incurred by Branigan Company in connection with the purchase and the delivery of
the goods were as follows: Normal freight charge Handling cost Insurance on shipment
Abnormal freight charge for express shipping.

What is the total cost that Branigan Company should charge to inventory?
a. 1,050,000
b. 1,030,000
c. 1, 055,000
d. 1, 067,000
Answer: C

31. Corolla Company incurred the following costs:

Materials 700,000
Storage Costs of finished goods 180,000
Delivery to customers 40,000
Irrecoverable purchase taxes 60,000
At what amount should the inventory be measured?
a. 880,000 b. 760,000 c. 980,000 d. 940,000
Answer: B
32. Eagle Company incurred the following costs in relation to a certain product:
Direct materials and labor 180,000
Variable production overhead 25,000
Factory administrative costs 15,000
Fixed production costs 20,000
What is the correct measurement of the product?
a. 205,000 b. 225,000 c. 195,000 d. 240,000
Answer: D

33. The following information applied to Fenn Company for the current year:
Merchandise purchase for resale 4,000,000
Freight in 100,000
Freight out 50,000
Purchase returns 20,000
Interest on inventory loan 200,000
What is the inventoriable cost of the purchase?
a. 4,280,000 b. 4,030,000 c. 4,080,000 d. 4,130,000
Answer: C

34. On December 28, 2011, Kerr Company purchase goods costing P500,000. The terms
where F.O.B. destination. Some of the costs incurred in connection with the sale and
delivery of the goods were as follows:
Packaging for shipment 10,000; shipping 15,000; special handling charges 25,000.
These goods were received on December 31, 2011. On December 31, 2011, what total
cost for these goods should be included in the inventory?
a. 545,000 b. 535,000 c. 520,000 d. 500,000
Answer: D

35. Mayday Parade Company uses a perpetual inventory system. At the end of 2010, the
balance in the inventory account was P360,000 and P30,000 of those goods included in
ending inventory were purchased FOB Shipping point and did not arrived until 2011.
Purchases in 2011 were P3,000,000. The perpetual inventory records showed an ending
inventory of P420,000 for 2011. A physical count of the goods on hand at the end of 2011
showed an inventory of P380,000. Inventory shortages are included in cost of goods sold.
What amount should be reported in the 2011 income statement for cost of goods sold?
a. 2, 940,000 b. 2,980,000 c. 3,000,000 d. 3,010,000
Answer: B

36. On December 1,2011, Alt department store received 505 sweaters on consignment
from Todd. Todd's cost for the sweaters was P800 each, and they were priced to sell at
P1,000. Alt's commission on consigned goods is 10%. On December 31, 2011, 5
sweaters remained. In its December 31, 2011 statement of financial position, what
amount should Alt report as payable for consigned goods?
a. 490,000 b. 454,000 c. 450,000 d. 404,000
Answer: C
37. On October 1, 2014, Grimm Company consigned 40 freezers to Holden Company
costing P14,000 each for sale at P20,000 each and paid P16,000 in transportation costs.
On December 30, 2014, Holden reported the sale of 10 freezers and remitted P170,000.
The remittance was net of the agreed 15% commission. What amount should Grim
recognize as consignment sales revenue for 2014?
a. 154,000 b. 170,000 c. 196,000 d. 200,000
Answer: D

38. Dean Sportswear regularly buys sweaters form Mill Company and is allowed trade
discounts of 20% and 10% from the list price. Dean made a purchase on March 20, 2011,
and received an invoice with a list price of P600,000, a freight charge of P15,000 and
payment terms of 2/10, n/30. What is the cost of the purchase?
a. 432,000 b. 447,000 c. 438,360 d. 435,000
Answer: B

39. Hero Company's inventory on December 31, 2011 was P6,000,000 based on a
physical count of goods priced at cost and before any necessary year-end adjustments
relating to the following:
● Included in the physical count were goods billed to a customer FOB shipping
point on December 30,2011. These goods had a cost of P125,000 and were picked up
by the carrier on January 7, 2012.
● Goods shipped FOB shipping point on December 28, 2011, form a vendor to
Hero were received on January 4, 2012. The invoice cost was P300,000.
What amount should be reported as inventory on December 31, 2011?]
a. 5,875,000 b. 6,000,000 c. 6, 175,000 d. 6,300,000
Answer: D

40. The physical count conducted in the warehouse of Reverend Company on December
31, 2011 revealed merchandise with a total cost of P5,000,000. However, further
investigation revealed that the following items were excluded from the count.
● Goods sold to a customer, which are being held for the customer to call at the
customer's convenience with a cost of P200,000.
● A packing case containing a product costing P500,000 was standing in the
shipping room when the physical inventory was taken. It was not included in the inventory
because it was marked "hold for shipping instructions". The investigation revealed that
the customer's order was dated December 28, 2011, but that the case was shipped and
the customer billed on January 4, 2012.
● A special machine costing P250,000, fabricated to order for a customer, was
finished and specifically segregated at the back part of the shipping room on December
31,2011. The customer was billed on that date and the machine was excluded from
inventory although it was shipped on January 2, 2012.
What is the correct amount of inventory that should be reported on December 31, 2011?
a. 5,950,000 b. 5,750,000 c. 5,500,000 d. 5,700,000
Answer: C
41. The inventory on hand on December 31, 2011 for Fair Company is valued at a cost
of P950,000. The following items were not included in this inventory amount:
Item 1: Purchased goods in transit, shipped FOB destination, invoice price P30,000 which
includes freight charge of P1,500.
Item 2: Goods held on consignment by Fair Company at a sales price of P28,000,
including sales commission of 20% of the sales price.
Item 3: Goods sold to Grace Company, under terms FOB destination, invoiced for
P18,500 which includes P1,000 freight charge to deliver the goods. Goods are in transit.
The entity's selling price is 140% of cost. Item 4: Purchased goods in transit, terms FOB
shipping point, invoice price P50,000, freight cost, P2,500.
Item 5: Goods out on consignment to Manila Company, sales price P35,000, shipping
cost of P2,000.
What is the adjusted cost of the inventory on December 31,2011?
a. 1,042,000 b. 1,043,000 c. 1,040,000 d. 1,073,500
Answer: A

42. El Professor Company counted its ending inventory on December 31, 2011. None of
the following items were included when the total amount of the ending inventory was
computed:
● P150,000 in goods located in the entity's warehouse that are on consignment
from another entity.
● P200,000 in goods that were sold by the entity and shipped on December 30
and were in transit on December 31, 2011. The goods were received by the customer on
January 2, 2012. Terms were FOB destination.
● P300,000 in goods that were purchased by the entity and shipped on December
30 and were in transit on December 31, 2011. The goods were received by the entity on
January 2, 2012. Terms were FOB shipping point.
● P400,000 in goods that were sold by the entity and shipped on December 30
and were in transit on December 31, 2011. The goods were received by the customer on
January 2, 2012. Terms were FOB shipping point. The entity's reported inventory before
any corrections was P2,000,000.
What is the correct amount of inventory on December 31, 2011?
a. 2,500,000 b. 2,350,000 c. 2,900,000 d. 2,750,000
Answer: A

43. A physical count on December 31, 2011 revealed that Joy Company had inventory
with a cost of P4,440,000. The Audit identified that the following items were excluded
from this amount:
● Merchandise of P610,000 is held by Joy on consignment.
● Merchandise costing P380,000 was shipped by Joy FOB destination to a
customer on December 31, 2011. The customer was expected to receive the goods on
January 5, 2012.
● Merchandise costing P460,000 was shipped by Joy FOB shipping point to a
customer on December 29, 2011. The customer was expected to receive the goods on
January 5, 2012. Merchandise costing P830,000 shipped by a vendor FOB destination
on December 31, 2011 was received by Joy on January 5, 2012.
 ● Merchandise costing P510,000 purchased FOB shipping point was shipped by
the supplier on December 31, 2011 and received by Joy on January 5, 2012.
What is the correct inventory on December 31, 2011?
a. 5,300,000
b. 4,690,000
c. 3,800,000
d. 4,920,000
Answer: A

44. Mia Company submitted an inventory list on December 31, 2011 which showed a total
of P5,000,000.
● Excluded from the inventory was merchandise costing P80,000 because it was
transferred to the delivery department for packaging on December 28, 2011and for
shipping on January 2, 2012.
● The bill of lading and other import documents on a merchandise were delivered
by the bank and the trust receipt accepted by the entity on December 26, 2011. Taxes
and duties have been paid on this shipment but the broker did not deliver the merchandise
until January 7, 2012. Delivered cost of the shipment totaled P800,000. This shipment
was not included in the inventory on December 31, 2011.
● A review of the entity's purchased orders showed a commitment to buy P100,000
worth of merchandise from Myrose Company. This was not included in the inventory
because of the goods were received on January 3, 1012.
● Supplier's invoice for P300,000 worth of merchandise dated December 28, 2011
was received through the mail on December 30, 2011 although the goods arrived only on
January 4, 2012. Shipment terms are FOB shipping point. This items were included in the
December 31, 2011 inventory by the entity.
● Goods valued at P20,000 were received from Darlyn Company on December
28, 2011 for approval by Mia. The inventory team included this merchandise in the list but
did not place any value on it. On January 4, 2012, the entity informed the supplier by long
distance telephone of the acceptance of the goods and the supplier's invoice was
received on January 7, 2012.
● On December 27, 2011, an order for P25,000 worth of merchandise was placed.
This was included in the year-end inventory although it was received only on January 5,
2012. The seller shipped the goods FOB destination.

What is the correct inventory on December 31, 2011?

a. 5,855,000
b. 5,055,000
c. 5,555,000
d. 5,830,000
Answer: A
45. The physical count conducted in the warehouse of La Casa De Papel Company on
December 31, 2011 revealed total cost of P3,600,000. However, the following items was
excluded from the count:
● Goods sold to a customer which are being held for the customer to call for the
customer's convenience with a cost of P200,000.
● A packing case containing a product costing P80,000 was standing in the
shipping room when the physical inventory was taken. It was not included in the inventory
because it was marked "hold for shipping instruction".
● Goods in process costing P300,000 held by an outside processor for further
processing.
● Goods costing P50,000 shipped by a vendor FOB seller on December 28, 2011
and received by La Casa De Papel Company on January 10, 2012.
What is the correct inventory on December 31, 2011?
a. 4,180,000 b. 4,230,000 c. 3,980,000 d. 4,030,000
Answer: D

46. Lewis Company's usual sales terms are net 60 days, F.O.B. shipping point. Sales,
net of returns and allowances, totaled P9,200,000 for the year ended December 31, 2011,
before year-end adjustments.
● On December 27, 2011, Lewis authorized a customer to return, for full credit,
goods shipped and billed at P200,000 on December 15, 2011. The returned goods were
received by Lewis on January 4, 2012, and a P200,000 credit memo was issued and
recorded on the same date.
● Goods with an invoice amount of P300,000 were billed and recorded on January
3, 2012. The goods were shipped on December 30, 2011.
● Goods with an invoice amount of P400,000 were billed and recorded on
December 30, 2011. The goods were shipped on January 3, 2012.

What is the correct amount of net sales for 2011?

a. 9,300,000 b. 9,100,000 c. 9,000,000 d. 8,900,000
Answer: D

47. Lin Company sells its merchandise at a gross profit of 30%. On June 30, 2011, all of
Lin's inventory was destroyed by fire.
The following figures pertain to Lin's operations for the six months ended June 30, 2011:
Net sales 8,000,000
Beginning inventory 2,000,000
Net purchases 5,200,000
What is the estimated cost of the destroyed inventory?
a. 4,800,000 b. 2,800,000 c. 1,600,000 d. 800,000
Answer: C
48. Farmland Company produces milk on its farms. The entity produces 20% of the
community's milk that consumed. Farmland Company own 5 farms and had a stock of
2,100 cows and 1,050 heifers.

The farms produce 800,000 kilograms of milk a year and the average inventory held is
15,000 kilograms of milk. However, on December 31,2011 the entity is currently holding
50,000 kilograms of milk in powder. On December 31,2011, The biological assets are:

Purchased before January 1, 2011 (3 years old)

Purchased on January 1, 2011 (2 years old)
Purchased on July 1, 2011 (1.5 years old)

No animals were born or sold during the current year. The unit fair value less cost to sell
is as follows:

January 1, 2011:
1-year old 3,000
2- year old 4,000
July 1, 2011:
1-year old 3,000
December 31, 2011:
1-year old 3,200
2-year old 4,500
1.5-year old 3,600
3-year old 5,000

The entity has had problems during the year. Contaminated milk was sold to customers.
As a result, milk consumption has gone down. The entity's business is spread over
different parts of the country. The only region affected by the contamination was
Batangas. However, the cattle in this area were unaffected by the contamination and were
healthy. The entity feels that it cannot measure the fair value of the cows in the region
because of the problems created by the contamination. There are 600 cows and 200
heifers in the Batangas farm and all these animals had been purchased on January 1,
2011.

What is the fair value of biological assets on December 31, 2011?

a. 14, 550,000
b. 15, 750,000
c. 15,225,000
d. 11,850,000
Answer: A