Problem 1

PROBLEM 1
AAA Company provided the following information at year-end:

Materials 1,400,000
Goods in process 4,000,000
Finished goods in factory 2,900,000
Cost of goods held by sales agents 1,200,000
Cost of goods held by consignee 800,000
Goods held by AAA, where AAA is a consignee 250,000
Purchased goods in transit, shipped FOB destination 120,000
Purchased goods in transit, shipped FOB shipping point 500,000
Cost of goods sold in transit, shipped FOB destination 820,000
Cost of goods sold in transit, shipped FOB shipping point 230,000
Determine the correct amount of inventory to be reported at year-end.
PROBLEM 2
BBB Company sells carbonated drinks by the liter. At the beginning of the current year, the entity’s
inventory consisted of 900 liters of drinks priced at P100 per liter. During the year, the following events
occurred:
1. Purchased 8,000 liters on account at P100 each.
2. Returned 500 liters to supplier due to quality issues.
3. Paid 6,000 liters purchased.
4. Sold 7,900 liters at P200 each.
5. Received 200 liters returned by a customer and gave credit. The drinks were in excellent
condition.
6. Received cash for 6,800 liters sold.
7. Inventory count at year-end revealed 600 liters on hand. The decrease is accounted for as
normal loss.
Requirement:
1. Prepare the journal entries assuming the company uses periodic system.
2. Prepare the journal entries assuming the company uses perpetual system.
PROBLEM 3
CCC Company provided the following transactions for the current year, the first year of operations:
1. Purchase of merchandise at an invoice price of P4,750,000, excluding freight. Terms are 2/10,
n/30.
2. Freight paid, P250,000. The freight is allocated to each purchase.
3. Cash payment on purchases, P3,717,000, of which, P1,617,000 was paid within the discount
period.
Prepare the journal entries to record the transactions using:

a. Gross method
b. Net method
PROBLEM 4
DDD Company had the following transactions relating to inventory during January:
Units Unit Cost
Jan. 1 Balance on hand 6,000 150
5 Purchase 2,000 200
10 Sale 4,000
15 Sale 1,000
20 Purchase 2,500 300
25 Purchase 2,000 400
31 Sale 3,000
Determine the ending inventory and cost of goods sold under each of the following costing methods:
1. FIFO – periodic
2. FIFO – perpetual
3. Weighted average method – periodic
4. Moving average method
PROBLEM 5
EEE Company has the following information related to its inventory at year-end:
Item Units Unit Cost Estimated selling price per unit Cost to sell per unit
A 1,000 120 180 30
B 1,500 110 140 20
C 1,200 150 170 30
D 1,800 140 190 30
E 1,700 130 150 40
Requirements:
1. Determine the amount of inventory to be presented in the financial statements.
2. Prepare the year-end adjusting journal entry
a. If the beginning balance of allowance for inventory writedown is P30,000
b. If the beginning balance of allowance for inventory writedown is P50,000
PROBLEM 6
FFF Corporation is currently preparing its interim financial statements as of and for the interim period
ended September 30, 2020. The following information were obtained:
Inventory, January 1, 2020 1,200,000
Purchases, January 1 to September 30 800,000
Purchase returns, January 1 to September 30 25,000
Purchase discounts, January 1 to September 30 35,000
Freight in 20,000
Sales 1,395,000
Sales returns 10,000
Sales discounts 40,000
Employee discounts 15,000
1. What the correct net sales for inventory estimation purposes?

2. If the company is using a gross profit rate based on sales of 30%,
a. What is the cost of goods sold for the interim period?
b. What is the estimated ending inventory as of the end of the interim period?
3. If the company is using a gross profit rate based on cost of 40%,
a. What is the cost of goods sold for the interim period?
b. What is the estimated ending inventory as of the end of the interim period?
PROBLEM 7
GGG Company is keeping a record of their inventory at cost with their corresponding selling price. The
entity’s record revealed the following information related to their inventory on September 30, 2020:
Cost Retail
Inventory, October 1, 2019 372,000 620,000
Purchases 3,110,000 4,760,000
Transportation in 55,000
Sales 4,872,000
Purchase return 27,000 45,000
Sales allowance 125,500
Purchase allowance 18,500
Sales returns 355,000
Sales discounts 322,250
Purchase discounts 15,960
Normal breakages 50,500
Abnormal breakages 200,000 308,000
Discounts granted to employees 75,500
Departmental transfer out 135,500 175,000
Departmental transfer in 125,500 165,000
Mark ups 290,000
Mark downs 283,000
Mark up cancellations 40,000
Mark down cancellations 40,000
Compute for the estimated ending inventory under:

1. The conventional retail method
2. The average cost retail method
3. The FIFO retail method

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PROBLEM 1

AAA Company provided the following information at year-end:

Determine the correct amount of inventory to be reported at year-end.

Prepare the journal entries to record the transactions using:

1. What the correct net sales for inventory estimation purposes?

Compute for the estimated ending inventory under:

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