Adeva, Maria Kathreena Andrea H.

BSA 2-11
Problems
1- 5 Centerpoint, Inc.

Inventory 562,500
Goods out on consignment 110,000
Goods in transit purchased FOB shipping point 27,000
Goods in transit sold FOB shipping point (included in the inventory) -85,000
Goods in transit sold FOB destination (not included in the inventory) 26,000
Goods in transit sold FOB destination (not included in the inventory) 37,000
Correct amount of inventory 677,500

* the basic criterion for including items in inventory is its economic control such as
goods in transit purchased FOB shipping point and goods in transit sold FOB destination.

1- 9 Mazda Corporation

a) FIFO Method
2017 2018 2019
Beginning 0 3,000@700 5,000@820
Units produced 13,000 18,000 25,000
Production cost per unit 700 820 850
Goods available for sale 9,100,000 16,860,000 25,350,000
Ending inventory 3,000@700 5,000@820 6,000@850
Cost of goods sold 7,000,000 12,760,000 20,250,000

* ending inventory is measured based on the most recent costs.

Sales 12,000,000 18,800,000 29,400,000

Cost of goods sold -7,000,000 -12,760,000 -20,250,000
Gross profit 5,000,000 6,040,000 9,150,000

b) Weighted Average Method (Periodic)

2017 2018 2019
Beginning 0 3,000@700 5,[email protected]
Units produced 13,000 18,000 25,000
Production cost per unit 700 820 850
Goods available for sale 9,100,000 16,860,000 25,264,300
Divided by total units 13,000 21,000 30,000
New cost per unit 700 802.86 842.14
Ending inventory 3,000@700 5,[email protected] 6,[email protected]
Cost of goods sold 7,000,000 12,845,700 20,211,460
 Sales 12,000,000 18,800,000 29,400,000
Cost of goods sold -7,000,000 -12,845,700 -20,211,460
Gross profit 5,000,000 5,954,300 9,188,540

1- 10 Sta. Lucia Company

Average FIFO Adjustments
2017
Profit 3,600,000
Inventory, end 1,200,000 1,240,000 40,000 40,000
Adjusted profit 3,640,000

2018
Profit 5,000,000
Inventory, beg -40,000
Inventory, end 1,300,000 1,420,000 120,000 120,000
Adjusted profit 5,080,000

2019
Profit 7,000,000
Inventory, beg -120,000
Inventory, end 2,000,000 2,650,000 650,000 650,000
Adjusted profit 7,530,000

1- 13 Dechavez Company

a) Direct Method

2018
Sales 2,900,000
Cost of goods sold:
Inventory, beg 300,000
Purchases 1,200,000
Inventory, end -480,000 -1,020,000
Gross profit 1,880,000
Selling expenses -330,000
Administrative expenses -310,000
Profit 1,240,000

2019
Sales 3,200,000
Cost of goods sold:
Inventory, beg 480,000
Purchases 1,400,000
Inventory, end -600,000 -1,280,000
 Gross profit 1,920,000
Selling expenses -450,000
Administrative expenses -300,000
Profit 1,170,000

b) Allowance Method

2018
Sales 2,900,000
Cost of goods sold:
Inventory, beg 380,000
Purchases 1,200,000
Inventory, end -500,000 -1,080,000
Gross profit 1,820,000
Selling expenses -330,000
Administrative expenses -310,000
Gain on adjustment 60,000
Profit 1,240,000

2019
Sales 3,200,000
Cost of goods sold:
Inventory, beg 500,000
Purchases 1,400,000
Inventory, end -660,000 -1,240,000
Gross profit 1,960,000
Selling expenses -450,000
Administrative expenses -300,000
Loss on adjustment -40,000
Profit 1,170,000

1- 17 DEC Company

a) Based on sales

Inventory, beg 450,000

Purchases 3,150,000
Cost of goods available for sale 3,600,000
Less: Estimated cost of goods sold:
Sales 4,200,000
x 60% -2,520,000
Estimated ending inventory 1,080,000
Physical inventory -500,000
Estimated cost of the missing inventory 580,000
 a) Based on cost of sales

Inventory, beg 450,000

Purchases 3,150,000
Cost of goods available for sale 3,600,000
Less: Estimated cost of goods sold:
Sales 4,200,000
/ 140% -3,000,000
Estimated ending inventory 600,000
Physical inventory -500,000
Estimated cost of the missing inventory 100,000

1- 22 Blazing Red Company

Inventory, beg 575,400

Purchases:
Accounts payable, end 491,400
Payments to suppliers 1,950,000
Accounts payable, beg -352,560 2,088,840
Less: Estimated cost of goods sold:
Accounts receivable, end 515,560
Collections 3,015,200
Accounts receivable, beg -522,360
Sales 3,008,400 x 70% -2,105,880
Estimated ending inventory 558,360
Less:
Goods out on consignment 195,000
Goods in transit purchased FOB shipping point 69,500 -264,500
Estimated inventory fire loss 293,860

1- 23 Chic Department Store

a) Average b) FIFO
Cost Retail Cost Retail
Inventory, June 1 355,000 750,000 355,000 750,000
Purchases 2,400,000 4,000,000 2,400,000 4,000,000
Goods available for sale 2,755,000 4,750,000 2,755,000 4,750,000

Cost to retail ratio 2,755,000 2,400,000

4,750,000 4,000,000

= 58% 60%
Sales -3,500,000 -3,500,000
Ending inventory, at retail 1,250,000 1,250,000
 x 58% x 60%
Ending inventory, at cost 725,000 750,000

Goods available for sale 2,755,000 2,755,000

Ending inventory, at cost -725,000 -750,000
Cost of goods sold 2,030,000 2,005,000

1- 26 Uniwide Sales
a) 1) Average 2) FIFO
Cost Retail Cost Retail
Inventory, June 1 185,700 202,000 185,700 202,000
Purchases 339,380 458,000 339,380 458,000
Purchases allowance -11,000 -11,000
Freight-in 7,300 7,300
Departmental transfers-in 2,000 3,000 2,000 3,000
Additional markups 12,000 12,000
Markup cancellations -2,500 -2,500
Markdown -1,500 -1,500
337,680 469,000 337,680 469,000
Goods available for sale 523,380 671,000 523,380 671,000

Cost to retail ratio 523,380 337,680

671,000 469,000

= 78% 72%
Sales -374,000 -374,000
Inventory shortage -7,000 -7,000
Ending inventory, at retail 290,000 290,000
x 78% x 72%
Ending inventory, at cost 226,200 208,800

b)
Goods available for sale 523,380 523,380
Ending inventory, at cost -226,200 -208,800
Cost of goods sold 297,180 314,580

1- 28 USTFU Company

a)
Dec. 31, 2019 Loss on Purchase Commitments 50,000
Estimated Liability on Purchase Commitments 50,000
(1,000 x 1,200) - (1,000 x 1,150)
 Feb. 28, 2020 Purchases 1,150,000
Estimated Liability on Purchase Commitments 50,000
Accounts payable 1,200,000

b)
Dec. 31, 2019 Loss on Purchase Commitments 50,000
Estimated Liability on Purchase Commitments 50,000
(1,000 x 1,200) - (1,000 x 1,150)

Feb. 28, 2020 Purchases 1,100,000

Estimated Liability on Purchase Commitments 50,000
Loss on Purchase Commitments 50,000
Accounts payable 1,200,000
c)
Dec. 31, 2019 Loss on Purchase Commitments 50,000
Estimated Liability on Purchase Commitments 50,000
(1,000 x 1,200) - (1,000 x 1,150)

Feb. 28, 2020 Purchases 1,200,000

Estimated Liability on Purchase Commitments 50,000
Accounts payable 1,200,000
Recovery of Loss on Purchase Commitments 50,000

Multiple Choice

15 D 18 D 21 D
16 A 19 C
17 D 20 D

28 Yellow Ribbon Company

Inventory, Dec. 31, 2019 5,000,000

Excluded merchandise transferred to the delivery department 80,000
Undelivered merchandise 800,000
Goods in transit shipped FOB destination -25,000
Correct merchandise inventory at Dec. 31, 2019 C. 5,855,000

29 Whilczel Company

Physical count of inventory 77,500

Goods in transit purchased FOB shipping point excluded in the inventory 6,000
Correct amount of inventory at Oct. 31, 2019 B. 83,500
30 Elegance Manufacturing Company

Reported inventory 1,760,000

Less:
Direct materials in transit purchased FOB shipping point 120,000
Prepaid insurance on inventory 20,000
Markup on goods shipped on consignment 30,000 -170,000
Correct amount of inventory at Dec. 31, 2019 C. 1,590,000

31 Nike Trading

Markup on consignment 104,000 - (104,000/130%) 24,000

Goods held on consignment 56,000
Mark up on goods out on approval 32,500 - 25,000 7,500
Total amount to be deducted from inventory C. 87,500

34 Goodwill Enterpises
Cost Est. SP - Est. DC = NRV LCNRV
Confidence P 22 P 30 - 3 = P 27 P 22
Positive P 55 P 80 - 28 = P 52 P 52
B

39 National Wholesale Corporation

Inventory, beg 120,160

Add: Net purchases:
Purchases 405,476
Purchase returns and allowances -11,110 394,366
Cost of goods available for sale 514,526
Inventory, end -105,650
Cost of goods sold 408,876
Net sales for 2018:
Sales 530,180
Sales returns and allowances -5,980 524,200
Groos pofit based on sales on 2018 78%

Inventory, beg 105,650

Add: Net purchases:
Purchases 378,245
Purchase returns and allowances -10,295 367,950
Cost of goods available for sale 473,600
Less: Estimated Cost of goods sold:
Sales 450,200
Sales returns and allowances -5,100
 Net sales 445,100 x 78% -347,178
Estimated ending inventory 126,422
Less:
Undamaged inventory 69,738
Realizable value of damaged inventory 5,000 -74,738
Estimated fire loss D. 51,684

42 Corona Trading
Cost Retail
Inventory, Jan. 1 47,075 70,025
Net purchases 213,327 306,375
Freight-in 3,400
Additional markup 18,900
Cancellation of markup -7,800
Markdowns -10,640
Good available for sale 263,802 376,860

Cost to retail ratio 263,802

376,860

= 70%

Sales -320,500
Ending inventory, at retail 56,360
x 70%
Ending inventory, at cost 39,452
-39,452
Cost of goods sold before loss 224,350 D.

43 Ending inventory, at retail 56,360

Physical inventory, Dec. 31, at retail 39,390
Estimated loss, at retail 16,970
x 70%
Estimated loss from inventory shortage A. 11,879