Inventories

May 28, 2018 | Author: ralphalonzo | Category: Cost Of Goods Sold, Inventory, Accounts Payable, Inventory Valuation, Debits And Credits
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REVIEW OF FINANCIAL ACCOUNTING THEORY AND PRACTICE INVENTORIES 1. Cagayan Cagayan Company Company included included the the following following items under inentories! inentories! "aterials  'dance for materials materials ordered ordered )oods in process ,ne-pired insurance on inentories  'dertising  'dertising catalogs catalogs and shipping o-es /inished goods in factory /inished goods in company0owned retails store$ including +& profit on cost /inis inishe hed d go goods in in ha hands on on co consign ignees inc includ luding %& pro proffit on sa sales les /inished goods in transit to customers$ shipped /O3 destination$ at cost /inished goods out on approal$ at cost ,nsalale finished goods$ at cost Office supplies "aterials in transit shipped /O3 shipping point$ e-cluding freight of  #4&$&&& )oods held on consignment$ at sales price$ cost #1+&$&&& 5ow much is the correct amount of inentories6 a. #+$*1&$&&& . #+$+&&$&&&

# 1$%&&$&&& (&&$&&& *+&$&&& *&$&&& 1+&$&&& ($&&&$&&& 2+&$&&& %&&$&& $&&& (+&$&&& 1&&$&&& +&$&&& %&$&&& 44&$&&& (&&$&&&

c. #+$42+$&&& d. #+$%+&$&&&

(. The 'ulug 'ulug "anufac "anufacturi turing ng Company Company reiewed reiewed its year0en year0end d inento inentory ry and found found the following items! 7a8 7a8 ' pac9 pac9in ing g case case cont contai aini ning ng a prod produc uctt cost costin ing g #1&& #1&&$& $&&& && was was stan standi ding ng in the the shipping room when when the physical inentory inentory was ta9en. ta9en. It was not included in the inentory ecause it was mar9ed :5old for shipping instructions.; The customer$ ut the case was shipped and the costumer illed on ?anuary 1&$ (&&*. 78 "ercha "erchand ndise ise costi costing ng #*&&$& #*&&$&&& && was receie receied d on =eceme =ecemerr (>$ (>$ (&&+$ (&&+$ and the inoice was was recorded. The inoice inoice was in the hands of the purchasing purchasing [email protected] [email protected] it was mar9ed :On consignment;. 7c8 7c8 "erc "ercha hand ndis ise e rece recei ied ed on ?anu ?anuar ary y *$ (&&* (&&*$$ cost costin ing g #2&& #2&&$& $&&& && was ente entere red d in purchase register register on ?anuary ?anuary 2. The inoice inoice showed shipment shipment was made /O3 /O3 shipping shipping point point on =eceme =ecemerr 41$ (&&+. 3ecaus 3ecause e it was not on hand during during the inentory count$ it was not included. 7d8 ' special special machine machine costin costing g #(&&$&&& #(&&$&&&$$ faricated faricated to order order for a particular particular custome customer$ r$ was finished in the shipping shipping room on =ecemer 4&. The customer customer was illed for  #4&&$&&& on that date and the machine was e-cluded from inentory although it was shipped ?anuary %$ (&&*. 7e8 "erchand "erchandise ise costing costing #(&&$& #(&&$&&& && was recei receied ed on ?anuary ?anuary *$ (&&*$ (&&*$ and and the related related purchase inoice was recorded ?anuary +. The inoice showed the shipment was made on =ecemer (A$(&&+$ /O3 destination. 7f8 "erchand "erchandise ise costi costing ng #1+&$& #1+&$&&& && was was sold sold on an an install installment ment asis asis on =ecem =ecemer er 1+. 1+. The customer too9 too9 possession possession of the goods on that date. date. The merchandise merchandise was included in inentory inentory ecause 'ulug 'ulug still holds legal title. 5istorical 5istorical e-perience suggests that full payment on installment sale is receied appro-imately AA of  the time. 7g8 )oods )oods cost costing ing #+& #+&&$& &$&&& && were were sold sold and and deli deliere ered d on =ecem =ecemer er (&. (&. The The goods goods were included in the inentory inentory ecause the sale was accompanied y a purchase purchase agreement reBuiring 'ulug to uy ac9 the inentory in /eruary (&&*.

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5ow much of these items should e included in the inentory alance at =ecemer 41$ (&&+6 a. #1$4&&$&&& c. #1$*+&$&&& . # >&&$&&& d. #1$&+&$&&&

4. The 'lcala Company counted its ending inentory on =ecemer 41. None of the following items were included when the total amount of the company$&&&$&&&

Calayan records losses that result from applying the lower of cost or mar9et rule. 't =ecemer 41$ (&&+$ Calayan should report inentory at a. #A$+&&$&&& c. #A$&&&$&&& . #>$&&&$&&& d. #2$&&&$&&& 1&.Claeria Company installs replacement siding$ windows$ and louered glass doors for  family homes. 't =ecemer 41$ (&&+$ the alance of raw materials inentory account was #+&($&&&$ and the allowance for inentory writedown was #44$&&&. The inentory cost and mar9et data at =ecemer 41$ (&&+$ are as follows! Cost

Replacement Cost

Sales Price

Net Realizable value

Normal Profit

  >A$&&& A%$&&&

>*$&&& A($&&&

A1$+&& A4$&&&

>2$&&& >+$&&&

+$&&& 2$&&&

1(+$&&& 1A%$&&& +&($&&&

14+$&&& 11%$&&& %(2$&&&

1(A$&&& (&+$&&& +1>$+&&

111$&&& 1A2$&&& %>&$&&&

1&$&&& (&$&&& 4($&&&

 'luminum siding "ahogany siding Fouered glass door )lass windows Total

The correct alance of the raw materials inentory after any allowance for write down is a. #%(2$&&& c. #%>&$&&& . #%>*$+&& d. #%22$&&&

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11. Enrile Company had 1>&$&&& units of #roduct ' on hand at ?anuary 1$ (&&+ costing #(& each. #urchases of product ' during the month of ?anuary were as follows! ,nits 1*&$&&& (&&$&&& 1%&$&&&

?anuary + 1+ 41

,nit cost 4& %& +&

 ' physical count on ?anuary 41$ (&&+ shows (&&$&&& units of product ' on hand. The inentory on ?anuary 41$ should e a. . c. d.

/I/O #A$%&&$&&& #%$(&&$&&& #A$%&&$&&& #%$(&&$&&&

FI/O #%$(&&$&&& #A$%&&$&&& #+$>&&$&&& #2$&&&$&&&

1(.)onaga Company uses the weighted aerage method to determine the cost of its inentory. )onaga recorded the following information pertaining to its inentory! 3alance 1D1 Sold on 1D1+ #urchased on 1D41

,nits 1*&$&&& 1%&$&&& >&$&&&

,nits cost *&

Total cost A$*&&$&&&

A&

2$(&&$&&&

hat amount of inentory should )onaga report in its ?anuary 41$ (&&+ alance sheet6 #erpetual #eriodic a. #>$%&&$&&& #2$&&&$&&& . #2$&&&$&&& #>$%&&$&&& c. #>$%&&$&&& #2$+&&$&&& d. #2$&&&$&&& #2$+&&$&&& 14. Fasam Company sells one product$ which it purchases from arious suppliers. The trial alance at =ecemer 41$ (&&+$ included the following accounts! Sales 71&&$&&& units at #1+&8 Sales discount #urchases #urchase discount /reight in /reight out

#1+$&&&$&&& 1$&&&$&&& A$4&&$&&& %&&$&&& 1&&$&&& (&&$&&&

The inentory purchases during (&&+ were as follows! 3eginning inentory$ ?anuary 1 #urchases$ Buarter ended "arch 41 #urchases$ Buarter ended ?une 4& #urchases$ Buarter ended Sept. 4& #urchases$ Buarter ended =ec. 41

,nits (&$&&& 4&$&&& %&$&&& +&$&&& 1&$&&& 1+&$&&&

,nit cost #*& *+ 2& 2+ >&

Total cost # 1$(&&$&&& 1$A+&$&&& ($>&&$&&& 4$2+&$&&& >&&$&&& #1&$+&&$&&&

Fasam+& . #212$&&& d. #2%*$>+&

1+.Total deits and total credits in selected accounts of #iat Company$ after closing entries were posted on =ecemer 41$ (&&+ are gien elow. =eits # *&&$&&& +&&$&&& ($+&&$&&& 1&&$&&& (&&$&&& 4$&&&$&&& 1$+&&$&&& 2&&$&&&

"aterials )oods in process "aterial purchases #urchase discounts Transportation in =irect laor "anufacturing oerhead /inished goods Cost of goods sold was a. #2$1&&$&&& . #2$&&&$&&&

Credits # (&&$&&& 4&&$&&& ($+&&$&&& 1&&$&&& (&&$&&& 4$&&&$&&& 1$+&&$&&& %&&$&&&

c. #*$A&&$&&& d. #2$%&&$&&&

1*.On 'ugust 4&$ (&&+$ Sta. 'na Company purchased a tract of land for #1($&&&$&&&. Sta. 'na incurred additional cost of #4$&&&$&&& during the remainder of (&&+ in preparing the land for sale. The tract was sudiided into residential lots as follows! Fot class  ' 3 C

Numer of lots 1&& 1&& (&&

Sales price per lot (%&$&&& 1*&$&&& 1&&$&&&

,sing the relatie sales alue method$ what amount of cost should e allocated to Class C lots6 a. #*$&&&$&&& c. #2$+&&$&&& . #+$&&&$&&& d. #%$&&&$&&&

12.On Noemer 12$ (&&+$ Solana 'irways entered in to a commitment to purchase 4$&&& arrels of aiation fuel for #A$&&&$&&& on "arch (4$ (&&*. Solana entered into this purchase commitment to protect itself against the olatility in the aiation fuel mar9et. 3y =ecemer 41$ (&&+$ the purchase price of aiation fuel had fallen to #($(&& per  arrel. 5oweer$ y "arch (4$ (&&*$ when Solana too9 deliery of the 4$&&& arrels$ the price of aiation fuel had risen to #($+&& per arrel. 5ow much should e recognied as loss on purchase commitment on =ecemer 41$ (&&+6 a. #1$+&&$&&& c. #($%&&$&&& . # A&&$&&& d. # &

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