ACITIVITY 2B

5. Problem 16-27 (IAA)

A physical count on December 31, 2019 revealed that Joy Company had inventory with a cost of P4,410,000. The Audit
identified that the following items were excluded from this amount:

● Merchandise of P610,000 is held by Joy on consignment. excluded

● Merchadise costing P380,000 was shipped by Joy FOB destination to a customer on December 31, 2019. The customer
was expected to received the goods on January 5, 2012. Included

● Merchandise costing P460,000 was shipped by Joy FOB shipping point to a customer on December 31, 2019. The
customer was expected to receive the goods on January 5, 2020. Excluded

● Merchandise costing P830,000 shipped by a vendor FOB destination on December 31, 2019 was received by Joy on
January 5, 2020. Excluded

● Merchandise costing P510,000 purchased FOB shipping point was shipped by the supplier on December 31, 2019 and
received by Joy on January 5, 2020. Included

What is the correct inventory on December 31, 2019?

Physical count 4,410,000

Add: Goods sold in transit, FOB destination 380,000

Goods purchased in transit, FOB shipping point 510,000

Adjusted inventory 5,300,000

6. Problem 16-12 (CGAC)

Brooke Company uses a perpetual inventory system. At the end of 2018, 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 2019. Purchases in 2019 were P3,000,000. The perpetual inventory records showed an ending inventory of
P420,000 for 2019.

A physical count of the goods on hand at the end of 2019 showed an inventory of P380,000. Inventory shortages are
included in cost of goods sold. What amount should be reported in the 2019 income statement for cost of good sold?

Inventory- December 31, 2018 360,000

Purchases-2019 3,000,000

Good available for sale 3,360,000

Inventory- December 31, 2019 (380,000)

Cost of good sold 2,980,000

7. Problem 16-28 (AICPA Adapted)

Mia Company submitted an inventory list on December 31, 2019 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, 2019 and for shipping on January 2, 2020. Included

● 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, 2019. Taxes and duties have been paid on this shipment but the broker did not
deliver the merchandise until January 7, 2020. Delivered cost of the shipment totaled P800,000. This shipment was not
included in the inventory on December 31, 2019. Included

● 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, 2020.

● Supplier's invoice for P300,000 worth of merchandise dated December 28, 2019 was received through the mail on
December 30, 2019 although the goods arrived only on January 4, 2020. Shipment terms are FOB shipping point. This
items was included in the December 31, 2019 inventory by the entity.

● Goods valued at P20,000 were received from Darlyn Company on December 31, 2019 for approval by Mia. The
inventory team included this merchandise in the list but did not place any value on it. On January 4, 2020, 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, 2020.

● On December 27, 2020, an order for P25,000 worth of merchandise was placed. This was include in the year-end
inventory although it was received only on January 5, 2020. The seller shipped the goods FOB destination. What is the
correct inventory on December 31, 2019? excluded

Inventory per book 5,000,000

Inventory transferred in delivery department 80,000

Shipment consumed by bill of lading 800,000

Goods in transit, purchased FOB destination (25,000)

Correct inventory 5,855,000

8. Problem 16-10 (AICPA Adapted)

Stone Company had the following consignment transaction during December 2019:

Inventory shipped on consignment to Beta Company 1,800,000

Freight paid by Stone 90,000

Inventory received on consignment from Alpha Company 1,200,000

Freight paid by Alpha 50,000

No sales of consigned goods where made in December 2019. What amount should be included as consigned inventory
on December 31, 2019?

Inventory shipped on consignment to Beta 1,800,000

Freight paid by Stone 90,000

Total cost of consigned inventory 1,890,000

9. same in problem 1

10. Problem 16-29 (AICPA Adapted)

The physical count conducted in the warehouse of Leila Company on December 31, 2019 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". Included

● Goods in process costing P300,000 held by an outside processor for further processing. Included

● Goods costing P50,000 shipped by a vendor FOB seller/shipping point on December 28, 2019 and received by Leila
Company on January 10, 2020 included

Inventory per physical count 3,600,000

Inventory marked "hold for shipping instructions" 80,000

Goods in process inventory 300,000

Goods shipped FOB seller or FOB shipping point 50,000

Correct Inventory 4,030,000

11. Problem 16-19 (IAA)

On August 1 of the current year, Stella Company recorded purchases of inventory of P800,000 and P1,000,000 under
credit terms of 2/15, net 30. The payment due on the P800,000 purchase was remitted on August 16. The payment due
on the P1,000,000 purchase was remitted on August 31. Under the net method and the gross method, these purchases
should be included at what respective amount in the determination of cost of goods available for sale?

Net method

Purchases (800,000 + 1,000,000) 1,800,000

Purchase discount taken (2% x 800,000) (16,000)

Purchase discount not taken (2% x 1,000,000) (20,000)

Net amount 1,764,000

Under the net method, the purchase discount is deducted from purchases regardless of whether taken or not taken.
Gross method

Purchases 1,800,000

Purchase discount taken (16,000)

Net purchases 1,784,000

Under the gross method, the purchases are recorded at gross and only the purchase discount taken is deducted from
purchases in determining cost of goods available for sale.

12. Problem 16-9 (AICPA Adapted)

On December 26, 2019, Branigan Company purchased goods costing P1,000,000. The terms were FOB Shipping point.
The goods were received on December 28, 2019. Costs incurred by Branigan Company in connection with the purchase
and the delivery of the goods were as follows:

Normal freight charge 30,000

Handling cost 20,000

Insurance on shipment 5,000

Abnormal freight charge for express shipping 12,000

Purchase price 1,000,000

Normal freight charge 30,000

Handling cost 20,000

Insurance on shipment 5,000

Total cost of inventory 1,055,000

The abnormal freight charge should be charged to expense.

13. Problem16-3 (IAA)

The information below is taken from the records of Ram Company at the end of current year

Finished goods in storeroom, at cost, including overhead of P400,000 or 20%. 2,700,000

Finished goods in transit, including freight charge of P20,000, FOB shipping point 250,000

Finished goods held by salesmen, at selling price, cost, P100,000 140,000

Goods in process, at cost of materials and direct labor 720,000

Materials 1,000,000

Materials in transit, FOB destination 50,000

Defective materials returned to suppliers 100,000

Shipping supplies 20,000

Gasoline and oil for testing finished goods 110,000

Machine lubricants 60,000

Finished goods

Finished goods held by salesmen

Goods in process (720,000/80%)

Materials

Factory supplies (110,000 + 60,000)

Correct inventory 4,170,000

14. Problem 16-26 (IAA)

Sterling Comapany reported its 2011 year-end inventory at P7,600,000 before the following adjustments:

● Goods valued at P1,000,000 are on consignment with a customer. These goods are not included in the year-end
inventory. Included

● Goods costing P250,000 were received from a vendor on January 12,2012. The goods were shipped on December 31,
2011, terms FOB shipping point. Included

● Goods costing P850,000 were shipped on December 31, 2011, and were delivered to the customer on January 2, 2012.
The terms of the invoice were FOB shipping point. The goods were included in ending inventory for 2011 even though
the sale was recorded in 2011. Excluded

● A P350,0000 shipment of goods to a customer on December 31, 2011, terms FOB destination, was not included in the
year-end inventory. The goods cost P260,000 and were delivered to customer on January 8, 2012. The sale was properly
recorded in 2012. (hindi naman dumating sa kanya bago mag December kaya included pa rin sa inventory natin)

● An invoice for goods costing P350,000 was received and recorded as a purchase on December 31, 2011. The related
goods, shipped FOB destination, were received on January 2, 2012, and thus were not included in the physical inventory.
● Goods valued at P650,000 are on consignment from a vendor. These goods are not included in the year-end inventory.
● A P1,050,000 shipment of goods to a customer on December 30, 2011, terms FOB destination, was recorded as a sale
in 2011. The goods, costing P840,000 and delivered to the customer on January 6, 2012, were not included in 2011
inventory . (hindi naman dumating sa kanya bago mag December kaya included pa rin sa inventory natin)

Inventory before adjustment 7,600,000

Goods out on consignment 1,000,000

Goods purchased, FOB shipping point 250,000

Goods sold, FOB shipping point (850,000)

Goods sold, FOB destination 260,000

Goods sold, FOB destination 840,000 9,100,000

Question 15: easy lang

16. Problem 16-25 (IAA)

Baritone 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. Included

● 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. Included

● 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?

Reported inventory 2,000,000

Goods sold in transit, FOB destination 200,000

Goods purchased in transit, FOB shipping point 300,000

Correct amount of inventory 2,500,000

17. Problem 16-18 (AICPA Adapted)

On June 1, 2011, Pitt Company sold merchandise with a list price of P5,000,000 to Burr on account. Pitt allowed trade
discount of 30% and 20%. Credit terms were 2/10,n/30 and the sale was made FOB shipping point. Pitt prepaid P200,000
of delivery costs for Burr as an accommodation. On June 11, 2011, what amount was received by Pitt form Burr as
remittance in full?

List price 5,000,000

Trade discounts: 30% x 5,000,000 (1,500,000)

3,500,000 20% x 3,500,000 (700,000)

Invoice price 2,800,000

Cash discount (2% x 2,800,000) (56,000)

Net amount 2,744,000

18. Problem 16-2 (IAA)

Lunar Company included the following items under inventory:

Materials 1,400,000

Advance for materials ordered 200,000

Goods in process 650,000

Unexpired insurance on inventory 60,000

Advertising catalogs and shipping cartons 150,000

Finished goods in factory 2,000,000

Finished goods in entity-owned retails store, including 50% profit on cost 750,000

Finished goods in hands of consignees including 40% profit on sales 400,000

Finished goods in transit to customer, shipped FOB destination at cost 250,000

Finished goods out on approval, at cost 100,000

Unsalable finished goods, at cost 50,000

Office supplies 40,000

Materials in transit, shipped FOB shipping point, excluding rate of P30,000 330,000

Goods held on consignment, at sales price, cost P150,000 200,000

Materials

Goods in process

Finished goods in factory

Finished goods in entity-owned retails store (750,000/150%)

Finished goods in hands of consignees (400,000*60%)

Finished goods in transit

Finished goods out on approval

Materials in transit (330,000 + 30,000)

Correct inventory 5,500,000

19. Problem 16-1 (IAA)

ACTIVITY 2C

1. Problem16-31 (AICPA Adapted)

Kew Company 's accounts payable balance on December 31, 2011, was P2,200,000 before considering the following
data:

● Goods shipped to Kew F.O.B. shipping point on December 22, 2011, were lost in transit. The invoice cost of P40,000
was not recorded by Kew. On January 7, 2012, Kew filed a P40,000 claim against the common carrier.

● On December 27, 2011, a vendor authorized Kew to return, for full credit, goods shipped and billed at P70,000 on
December 3, 2011. The returned goods were shipped by Kew on December 28, 2011. A P70,000 credit memo was
received and recorded by Kew on January 5, 2012

● On December 31, 2011, Kew has a P500,000 debit balance in its accounts payable to Ross, a supplier, resulting from a
P500,000 advance payment for goods to be manufactured to Kew specifications. What amount should be reported as
accounts payable in the December 31, 2011 statement of financial position?

Accounts payable per book 2,200,000

Goods shipped FOB shipping point on December 22, 2011 and lost in transit 40,000

Purchase returns (70,000)

Advance payment erroneously debited to accounts payable 500,000

Adjusted accounts payable 2,670,000

Kew Company shall suffer the loss of the goods in transit because the goods are shipped FOB shipping point.
Appropriately Kew Company must file a claim against the common carrier.

2. Problem 16-34 (AICPA Adapted)

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?

Net sales per book 9,200,000

Sales return (200,000)

Goods shipped on December 30, 2011 but recorded January 3, 2012 300,000

Goods shipped on January 3, 2012 erroneously recorded on December 30, 2011 (400,000)
Adjusted net sales 8,900,000

3. Problem 16-30 (AICPA Adapted)

Black Company's accounts payable on December 31, 2011, totaled P4,500,000 before any necessary year-end
adjustments relating to the following transactions:

 On December 27, 2011, Black wrote and recorded checks to creditors totaling P2,000,000 causing an overdraft of
P500,000 in Black's bank account on December 31, 2011. The checks were mailed on January 10, 2012.

● On December 28, 2011, Black purchased and received goods for P750,000, terms 2/10, n/30. Black records purchases
and accounts payable at net amount. The invoice was recorded and paid January 3, 2012.

● Goods shipped F.O.B destination on December 20, 2011 from a vendor to Black were received January 2, 2012. The
invoice cost was P325,000.

On December 31, 2011, what amount should Black report as account payable?

Accounts payable per book 4,500,000

Undelivered entity checks 2,000,000

Goods purchased and received on December 28, 2011. 750,000

Purchase discount ( 2% × 750,000) (15,000)

Total Accounts Payable 7,235,000

The undelivered checks should be adjusted as follows:

Cash 2,000,000

Accounts Payable 2,000,000

4. Problem 16-32 (CGAC)

Frankfurt am Main Company began operations late in 2019. For the first quarter ended March 31, 2020, the entity
provided the following information:

Total merchandise purchased through March 15, 2020 recorded at net, P4,900,000.

Merchandise inventory on December 31, 2019, at selling price, P1,500,000.

All merchandise was acquired on credit and no payments have been made on accounts payable since the inception of
the entity. All merchandise is marked to sell at 50% above invoice cost before time discounts of 2/10, n/20. No sales were
made in 2020.

What amount of cash is required to eliminate the balance in accounts payable?

Gross purchases through March 15, 2011 (4,900,000/ 98%) 5,000,000

Inventory - December 31, 2010, at cost (1,500,000/ 150%) 1,000,000

Total gross amount to be paid 6,000,000

Hersfeld-Rotenburg Company is a wholesale distributor of automotive replacement parts. Initial amounts taken from
accounting records on December 31, 2019 are as follows:

Inventory on December 31 based on physical

P1,250,000
count

Accounts payable 1,000,000

Sales 9,000,000

1. Parts held on consignment from another entity to Hersfeld-Rotenburg, the consignee, amounting to P165,000,
were included in the physical count on December 31, 2019, and in accounts payable on December 31, 2019.
2. P20,000 of parts which were purchased and paid for in December 2019, were sold in the last week of 2019 and
appropriately recorded as sales of P28,000. The parts were included in the physical count on December 31, 2019
because the parts were on the loading dock waiting to be picked up by the customer.
3. Parts in transit on December 31, 2019 to customers, shipped FOB shipping point on December 28, 2019,
amounted to P34,000. The customers received the parts on January 6, 2020. Sales of P40,000 to the customers
for the parts were recorded by Hersfeld-Rotenburg on January 2, 2020.
4. Retailers were holding P210,000 at cost and P250,000 at retails, of goods on consignment from Hersfeld-
Rotenburg, at their stores on December 31, 2019.
5. Goods were in transit from a vendor to Hersfeld-Rotenburg on December 31, 2019. The cost of goods was
P25,000. The goods were shipped FOB shipping point on December 29, 2019.

Based on the above information, determine the following:

What is the correct amount of inventory? 1,300,000

What is the correct amount of accounts payable? 860,000

What is the correct amount of sales? 9,040,000

Inventory Accounts payable

Unadjusted 1,250,000 1,000,000
A (165,000) (165,000)
B (20,000) –
C - -
D 210,000 –
E 25,000 25,000
Adjusted 1,300,000 860,000