Inventories

August 12, 2017 | Author: Tammy Yeban | Category: Cost Of Goods Sold, Bad Debt, Inventory, Corporate Jargon, Financial Accounting
Share Embed Donate


Short Description

Chapter 4...

Description

Chapter 5 Inventories and Related Expenses MULTIPLE CHOICE – THEORY 1. C 6. D

2. D 7. A

3. A 8. A

4. C 9. D

Problem 1 (Goodwill Company) Inventories Cost of Sales 16,000 + 13,200 + 26,100 + 19,200 + 14,300 = 88,800

5. A 10. D

88,800 88,800

Accounts Payable Cost of Sales

15,920

Inventories Cost of Sales

13,500

Cost of Sales Accounts Payable

13,500

Cost of Sales Accounts Payable

4,200

Inventories Accounts Payable 16,000 + 6,200 = 22,200 or two separate entries for purchases and inclusion in ending inventory

22,200

Cost of Sales Inventories

85,000

Sales

98,000

15,920

13,500 4,200 22,200

85,000

Accounts Receivable

98,000

Inventories Cost of Sales

65,000

Cost of Sales Inventories

17,600

65,000 17,600

Problem 2 (Victory Enterprises) Inventory, per client Goods shipped to customer on Dec 31, 2010 (presumed in transit), FOB destination Goods in transit, shipped by a supplier FOB shipping point Correct inventory amount, December 31 Inventories Cost of Sales

13,500

P 441,800 38,000 51,000 P 530,800

89,000 89,000

Chapter 5 Inventories and Related Expenses Problem 3 (Raindrops Company) (a) Correct inventory, November 30 Purchases in November 12,000 + 14,000 Units sold (50,000 – 4,000) Correct inventory level, December 31

55,000 26,000 (46,000) 35,000

(b) Adjusting entries: Cost of Sales (unrecorded purchases) Accounts Payable 14,000 x 90 = P1,120,000

1,260,000 1,260,000

Sales (4,000 x 125) Accounts Receivable

500,000

Inventories (18,000 x 90) Cost of Sales

1,620,000

500,000 1,620,000

Inventories, November 30 Received in December Shipped out Goods reported Correct inventory level Understatement in units

55,000 12,000 (50,000) 17,000 35,000 18,000

Problem 4 (Bulls Company) (a)

Net adjustment to Inventory = 21,096 net debit (See audit adjustments) Inventory, per count Net adjustment to inventory Inventory, per audit

(b)

P98,000 21,096 P119,096

Adjusting entries Sales

15,773 Accounts Receivable 5,841 + 7,922 + 2,010

15,773

Cost of Sales / Purchases Accounts Payable

2,183

Inventory

8,120

2,183

Cost of Sales / Income Summary

Inventory (12,700 /125%) Cost of Sales / Income Summary Sales

8,120

10,160 10,160 19,270

Accounts Receivable

Inventory (19,270/125%) Cost of Sales

19,270

15,416 15,416

50

Chapter 5 Inventories and Related Expenses Miscellaneous Receivables (from Carrier) Inventory 11,250 + 1,350

12,600 12,600

Problem 5 Initial amounts Adjustments: a. b. c. d. e. f. g. h. Net adjustment Corrected balances a.

Inventory 2,400,000

Accts Payable 800,000

65,000 50,000 32,000 61,000 27,000

65,000

(60,000)

c.

Inventory

60,000 65,000

Accounts Payable

50,000

Sales Returns and Allowances Accounts Receivable

45,000

Inventory

32,000

45,000

Cost of Sales e.

32,000

Inventory

61,000 Cost of Sales

f.

61,000

Inventory

27,000 Cost of Sales

g. h.

65,000

50,000 Cost of Sales

d.

56,000 8,000 129,000 P929,000

60,000 Accounts Receivable

Inventory

(45,000)

4,000 239,000 P2,639,000

Sales

b.

Net Sales 10,150,000

27,000

Cost of Sales Accounts Payable

56,000

Cost of Sales Inventory Accounts Payable

4,000 4,000

56,000

8,000

51

(105,000) P10,045,000

Chapter 5 Inventories and Related Expenses Problem 6 (Firenze Fashions) General Ledger P 221,020

Unadjusted balances Goods held on consignment Goods purchased FOB shipping point, in transit Goods shipped out FOB destination, in transit Goods purchased and received, but not yet recorded Goods sold, still unrecorded Unsalable goods Balance per audit

24,000 27,300 (63,000) (26,500) P 182,820

Audit Adjustments Sales

39,000 Accounts Receivable

Inventory

39,000 24,000

Cost of Sales

Inventory

24,000

27,300 Accounts Payable

27,300

Accounts Receivable Sales

96,000

Cost of Sales Inventory

63,000

Loss from Inventory Obsolescence Inventory

26,500

96,000 63,000 26,500

Problem 7 No entry on the P100,000 shipment Inventory (75% x 80,000) Cost of Sales

60,000

Accounts Receivable Sales

60,000

Sales

40,000

60,000 60,000

Accounts Receivable

40,000

Inventory

30,000 Cost of Sales

30,000

52

Physical Count P 212,820 ( 66,000) 12,000 24,000

P 182,820

Chapter 5 Inventories and Related Expenses Problem 8 (Maligaya Corporation) Overall Gross Profit Ratio Inventory, January 1, 2011 Net Purchases 2011 and 2012 (2,800,000 + 2,350,000) Goods available for sale Less: inventory, December 31, 2012 Cost of goods sold, 2005 and 2006

P 660,000 5,150,000 P5,810,000 750,000 P5,060,000

Sales – 2011 and 2012 (5,300,000 + 3,900,000) Less: Cost of goods sold Gross Profit

P9,200,000 5,060,000 P4,140,000

Gross Profit Ratio = 4,140,000/ 9,200,000

45%

Inventory Fire Loss Inventory, January 1, 2013 Add: Purchases January 1 to April 15, 2013 January 1 to March 31 April 1 to 15 Paid Unpaid Purchase returns Total goods available for sale Less; Cost of goods sold, January 1 to April 15 Accounts Receivable, April 15 Write off Collections (129,500 – 9,500) Accounts Receivable, March 31 Sales, April 1 to 15 Sales, January 1 to March 31 Sales, January 1 to April 15 Cost ratio (100% - 45% ) Inventory, April 15, before the fire Less: undamaged goods (in transit) Proceeds from sale of damaged goods (lower than cost) Inventory fire loss

P 750,000 P 520,000 34,000 106,000 ( 9,500) P 360,000 80,000 120,000 ( 400,000) P 160,000 1,350,000 P1,510,000 55% P 23,000 30,000

650,500 P1,400,500

830,500 P 570,000 53,000 P 517,000

Problem 9 (Billy Corporation) 11 months ended May 31 P 6,750,000 75,000 (10,000) (20,000) (55,000) P6,740,000

Purchases per client Shipments received in May but recorded in June Credit memoranda not recorded Deposit for July purchases recorded as April purchases Deposit in May, recorded as purchases Purchases, per audit (a)

Inventory, July 1, 2011 Purchases, July 1, 2011 to May 31, 2013 Total goods available for sale Less: Inventory, May 31, 2013 (950,000 – 55,000) Cost of goods sold July 1, 2011 to May 31, 2013

53

P 875,000 6,740,000 P7,615,000 895,000 P6,720,000

Year ended June 30 P 8,000,000 (15,000) (20,000) 55,000 P8,020,000

Chapter 5 Inventories and Related Expenses

(b)

(c)

Gross profit 8,400,000 – 6,720,000 = Gross profit ratio = 1,680,000/ 8,400,000

1,680,000 20%

Sales in June at normal selling price (P9,600,000 – 8,400,000) – 100,000 Cost ratio Cost of goods sold in June at normal selling price Cost of merchandise sold at cost Cost of goods sold in June

P1,100,000 80% P 880,000 100,000 P980,000

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

P895,000 1,280,000 2,175,000 980,000 1,195,000

Inventory, July 1, 2011 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

875,000 8,020,000 8,895,000 7,700,000 1,195,000

Problem 10 (Chi Fi Fai) Audit Adjusting Entries: Accounts Receivable Sales

50,000

Cost of Sales (50,000 x 80/120) Inventory

33,333

50,000 33,333

Other Operating Expenses – Loss from Inventory Contamination Cost of Sales

800,000

800,000

Cost of Sales 36,000 Accounts Payable 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 Realizable Value Cost of Sales (400,000 – 80,000) Accounts Payable (1.) (2.) (3.) (4.) (5.) (6.) (7.)

90,000 90,000 320,000 320,000

Inventory is overstated by P33,333 as a result of goods out on consignment. The Accounts Receivable is understated by P50,000, as a result of goods out on consignment. The net income is understated by P16,667, as a result of goods out on consignment. The accounts payable shall be increased by P320,000. The gross profit is increased by P80,000, which in effect is the commission income. Inventory at cost, per audit = P890,000 – P33,333 = P856,667. The inventory shall be presented at P766,667, which is the cost of P856,667 reduced by the allowance for decline in net realizable value of P90,000.

54

Chapter 5 Inventories and Related Expenses Problem 11 (Global Company) Audit Adjustments Selling and Administrative Expenses Receivables from Employees Petty Cash Fund

16,000 1,500

Cash in Banks – BDO Value Added Tax Payable

32,000

Notes Payable – Bank Interest Expense Cash in Banks – Asian Bank

50,000 18,000

17,500 32,000

68,000

Selling and Administrative Expenses Cash in Banks – BPI

200 200

Equipment Acquisition Fund Cash in Banks – PNB

1,100,000 1,100,000

Allowance for Doubtful Accounts Accounts Receivable (70% x 240,000)

168,000

Finished Goods Inventory Cost of Sales 200,000 x 60% x 50% = 60,000

60,000

Sales

75,000

168,000 60,000

Accounts Receivable 60,000 / 80%

75,000

Inventory of Spoiled Goods and Scrap Materials Cost of Sales Work in Process Inventory

42,000 38,000

Inventory of Spoiled Goods and Scrap Materials Cost of Sales

55,000

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

80,000 55,000 152,250 P3,400,000 ( 168,000) ( 75,000) P3,157,000 ( 72,000) P3,085,000 5% P 154,250 ( 2,000) P 152,250

55

152,250

Chapter 5 Inventories and Related Expenses (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (17) (18) (19)

Petty Cash Fund = Cash on deposits with Asian Bank = 400,000 – 68,000 Cash on deposits with Security Bank = 350,000 – 50,000 Cash on deposits with Banco de Oro = (12,000) + 32,000 Cash on deposits with BPI = 200,000 – 200 Cash on deposits with PNB Total Cash in Bank – Current Assets = 332,000 + 300,000 + 20,000 + 199,800 = Accounts Receivable Allowance for Uncollectible Accounts Uncollectible Accounts Expense = 80,000 + 152,250 Finished Goods Inventory = 600,000 + 60,000 Work in Process Inventory = 1,000,000 – 80,000 Raw Materials Inventory = Inventory of Spoiled Goods and Scrap Materials = 80,000 + 42,000 + 55,000 Sales = 6.000,000 – 75,000 Cost of Sales = 4,200,000 – 60,000 + 38,000 – 55,000 Selling and Administrative Expenses = 500,000 + 16,000 + 200 + 152,250 Other Operating Income Interest Expense and Finance Costs = 200,000 + 18,000

P2,500 P332,000 P300,000 P 20,000 P199,800 P1,100,000 P851,800 P3,157,000 P154,250 P232,250 P660,000 P920,000 P400,000 P177,000 P5,925,000 P4,123,000 P668,450 P120,000 P218,000

MULTIPLE CHOICE - PROBLEMS 1. 2. 3. 4. 5. 6.

A C C C A P6,566

7. B 8. B 9. C 10. C 11. D 12. A

13. 14. 15. 16. 17. 18.

C B A C B A

19. 20. 21. 22.

C C D A

Solutions: 1.

Cash = 240,800 – 163,650 + 90,000

P167,150

2.

Accounts Receivable = 563,500 + 77,500

P641,000

3.

Inventory = 1,512,500 + 68,750 + 54,375 – 159,375 + 32,500

P1,508,750

4.

Accounts Payable = 1,050,250 + 93,100 + 54,375 – 43,750

P1,153,975

5.

Inventory, January 1 Purchases Goods available for sale Cost of goods sold (4,000,000 x 70%) Inventory, based on gross profit test Inventory, per count Missing inventory

P 450,000 3,150,000 P3,600,000 2,800,000 P 800,000 750,000 P 50,000

6.

Cost P14,200 32,600

Inventory, January 1 Purchases Additional markup Markdown Goods available for sale Cost ratio = 46,800 / 69,800 = 67% Sales

P46,800

Retail P20,100 50,000 1,900 (2,200) P69,800 60,000

56

Chapter 5 Inventories and Related Expenses Ending inventory at retail Cost ratio Inventory, December 31

7.

P 9,800 67% P6,566

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

P 320,000 1,400,000 P1,720,000 P 300,000 1,800,000 ( 250,000) P1,850,000 350,000 P2,200,000 60%

1,320,000 P400,000 360,000 P 40,000

Items 8 and 9 Per audit: P225,000 300,000 375,000 P900,000

Overhead = 25% x P900,000 = Direct labor cost = P225,000/75% Direct materials 900,000 – 225,000 – 300,000 Total manufacturing cost

Per client P225,000 275,000 400,000

Let x be the ending work in process inventory .6 x is the beginning inventory .6x + 900,000 – x = 800,000 100,000 = .4x x = 250,000 10.

Sales per client Returned goods Goods shipped in December Goods shipped in January Correct sales

P2,300,000 ( 50,000) 80,000 ( 100,000) P2,230,000

57

Adjustment P 0 25,000 (25,000)

Chapter 5 Inventories and Related Expenses Items 11 through 14

Per client Parts held on consignment, recorded as purchases and included in inventory Parts sold still included in inventory Parts sold FOB shipping point Goods out on consignment Goods purchased in transit, FOB shipping point Freight bill, unrecorded, relating to unsold goods Cash discounts available Per audit

Inventory

Accounts Payable

Sales

1,250,000 (155,000)

1,000,000 (155,000)

9,000,000

Effect on Cost of Sales ---

(22,000)

22,000 40,000

210,000 25,000

25,000

(210,000)

2,000

2,000

(5,300) 1,304,700

(5,300) 866,700

Inventory

Purchases P 17,940

9,040,000

(188,000)

Sales

Net income P(17,940) (31,380) (12,150) 18,200 P(7,390)

Items 15 through 18 March purchases recorded in Apr Shipments in April Goods shipped on March 31 Goods not counted Understate (overstatement)

(31,380) (12,150) 18,200 P6,050

19.

Cash balance, December 31, 2010 Payment on accounts payable Payment for operating expenses Total cash available Cash balance, December 31, 2009 Collection on notes receivable Sales Unit sales price Units sold

20.

Average cost of purchases 32.60 + 32.60 x 0.10 (11 months) 2

22.

Units in the beginning inventory Units purchased 1,500 x 12 Units sold Units in the ending inventory

P(31,380) P353,300 474,700 220,000 P1,048,000 (100,000) ( 25,000) P923,000 P 50 18,460

Accounts payable, Beginning Purchases 1,500 x 12 months x P33.15 Payments on accounts payable Accounts payable, ending 21.

P17,940

P 33.15 P 75,000 596,700 (474,700) P197,000

199,875 / 32.50

Valued as follows 1,500 x 33.70 1,500 x 33.60 1,500 x 33.50 1,190 x 33.40 Inventory, December 31, 2012

6,150 18,000 (18,460) 5,690 P50,550 50,400 50,250 39,746 P190,946

58

Chapter 5 Inventories and Related Expenses TIGER CORPORATION Per count Coins and currencies Checks Petty cash vouchers December 2012 January 2013 Advances to Officers and Employees December 2012 January 2013 Total per count Cashier’s accountability Petty cash fund Collections December collection P1,500 January 2006 collection 2,700 Cash shortage

P4,700 4,200 P1,900 500

2,400

P 900 300

1,200 P12,500

P10,000 4,200

14,200 P1,700

Cash in Bank Unadjusted Balances Deposits in transit Unrecorded and undeposited collections (see above) Unreleased checks Stale checks Outstanding checks (22,630 – 5,750 – 4,280) Uncollected note from Sergio Garcia Principal P3,600 Interest 108 DAIF Check from customer Service charges Adjusted balances

Per Bank P252,742 10,700 1,500

Per Books P247,820 1,500 5,750 4,280

(12,600)

P252,342

(3,708) (2,850) ( 450) P252,342

Adjusting entries Selling and Administrative Expenses Receivable from Officers and Employees (900 + 1,700) Petty Cash Fund

1,900 2,600

Cash in Bank Accounts Receivable Accounts Payable (5,750 + 4,280)

11,530

4,500 1,500 10,030

Accounts Receivable (3,708 + 2,850) Selling and Administrative Expenses Cash in Bank

6,558 450

Sales

8,000

7,008

Accounts Receivable

8,000

59

Chapter 5 Inventories and Related Expenses Inventories Cost of Sales

7,500

Sales

10,000

7,500

Accounts Receivable

10,000

Accounts Receivable Sales

12,000

Cost of Sales Inventories

10,200

12,000 10,200

Allowance for Doubtful Accounts Selling and Administrative Expenses

47 47

Accounts Receivable Per client Adjustments

Per Audit Provision rate for uncollectibles Required allowance Existing allowance Deductions from uncollectible accounts expense Notes Receivable Notes Payable

P328,300 ( 1,500) 6,558 (8,000) (10,000) 12,000 P327,358 5% P 16,368 16,415 P ( 47) 10,000 10,000

Interest Expense Interest Payable 10,000 x 22% x 30/360 = 183

183 183

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 Total P1,415

1,415

Income Tax Payable Income Tax Expense 35,065 – 32,135 = 3,127

2,930

1,415

2,930

60

Chapter 5 Inventories and Related Expenses Answers: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

Petty Cash Cash in bank Accounts receivable Allowance for doubtful accounts Notes receivable Interest receivable Merchandise inventory Receivables from officers and Employees Accounts payable Notes payable Interest Payable Income tax payable Sales Cost of sales Selling and administrative expenses Bad debts expense Interest income Interest expense and bank charges Net income Total assets

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 1,184,700 530,300 12,553 9,820 56,703 72,838 2,224,430

61

View more...

Comments

Copyright ©2017 KUPDF Inc.
SUPPORT KUPDF