Inventories Set 2 - Online Quiz - 3.24.20

1
ACCOUNTING 201
Inventories
PROBLEM 1 – Multiple Choice – Write the letter as well as the entire answer
1. Which term represents the deduction from the invoice price of purchased goods granted by the
seller for early payment?
a.Trade discount b. sales discount c. purchase discount d. PRA
2. What is consigned inventory?

a. Good that are shipped and title transferred to the receiver
b. Goods that are sold but payment is not required until the goods are sold
c. Goods that are shipped but title remains with the shipper
d. Goods that have been segregated for shipment to a customer
3. Why is inventory included in the computation of net income?

a. To determine sales revenue c. to determine merchandise returns
b. To determine CGS d. inventory is not included in the computation of net income
4. An entity that purchased inventory for resale to customers should charge what account?
a. Finished goods b. work in process c. merchandise inventory a. all are correct
5. In a periodic inventory system, the beginning inventory is

a. Net purchases minus CGS c. TGAS minus net purchases
b. Net purchases minus ending inventory d. TGAS minus CGS
6. Which of the following is a characteristic of a perpetual inventory system?

a. Inventory purchases are debited to purchases account
b. Inventory records are not kept for every item
c. Cost of goods sold is recorded with each sale
d. CGS is determined as the amount of purchases less the change in inventory
7. Goods on consignment are included in the inventory of

a. The consignor but not the consignee c. both the consignor and the consignee
b. The consignee but not the consignor d. neither the consignor nor the consignee
8. CGS is the same under a periodic system as under a perpetual system when an entity uses
a. FIFO b. LIFO c. weighted average d. specific identification
9. Inventories shall be measured at

a. Cost b. net realizable value c. lower of cost and market d. LCNRV
10. Net realizable value is

a. Current replacement cost c. estimated selling price less estimated cost to complete
b. Estimated selling price d. estimated SP less estimated cost to complete and to dispose
11. IFRS prohibits which of the following cost flow assumption?

a.Weighted average b. LIFO c. specific identification d. all of these are allowed
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PROBLEM 2
In determining the December 31, 2019 ending inventory of Quarantine Co, the following
information are obtained:
Items counted in the store 5,643,200

Items in display racks not included in count 15,400
Items in the receiving department not included in count 109,900
Items consigned to SM not included in count 234,500
Items received Jan. 2, 2020, shipped FOB shipping point on Dec. 29 86,800
Items with defects, unsaleable, included in count 23,500
Items expired, to be returned to suppliers 19,900
Items bought in January recorded in December, 2019 123,400
Items shipped FOB dest Dec. 28 in transit at year-end, at sales price,
mark up is 20% on cost, 180,000
Items sold Jan. 3, 2019 excluded from count, recorded Dec. 31, at sales price,
at gross profit rate of 40% 250,000
REQUIRED
Determine the correct inventory to be presented in the December 31, 2019 balance sheet.
PROBLEM 3
The inventory records of Enhanced Corporation show the following purchases and sales for the
month of September, 2020:
Units Unit Cost
September 1 Beginning 4,000 360
4 Purchase 7,000 330
6 Sale 5,000
9 Purchase 7,000 370
18 Purchase 5,100 390
19 Purchase return on the
purchase yesterday 100 390
20 Sale 17,000
27 Purchase 7,000 380
28 Sale 3,000
REQUIRED
Compute the September 30 inventory and the cost of sales for the month under each of the
following methods of costing (Round unit cost to 2 decimal places, and amount, to the nearest peso):
1. FIFO periodic 3. Weighted average
2. FIFO perpetual
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PROBLEM 4
Barangay Co. began operations in September, 2020. His transactions were as follows:
1) Bought merchandise with a list price of 2,700,000. Terms: 2/10, n/30.

2) Paid in full the purchase in No. 1.
3) Bought merchandise, 6,400,000. Terms: 2/10, n/30, FOB shipping point
4) Paid the freight on the purchase in No. 3, 150,000.
5) Accounts paid, 6,250,000, including payments of 4,312,000 paid within the discount period.
6) Received credit memos for goods returned, 20,000.
7) Sold merchandise costing 5,400,000 for 7,200,000
8) Issued credit customers to customers for goods returned, 80,000, cost, 65,000.
9) Cash collection on accounts, including accounts of 4,400,000 with 2% discount, 6,500,000.
REQUIRED
Journalize the above transactions under the periodic and perpetual inventory methods.
PROBLEM 5
The inventory records of Corona Company show the following data as of December 31, 2020:
Item Units Cost Estimated Sales Price Cost To Sell

A 1,400 120 170 40
B 1,500 77 100 25
C 1,600 225 285 50
D 1,700 275 354 92
E 1,800 450 600 120
F 1,900 70 108 30
REQUIRED
1. Determine the ending inventory applying the lower of cost or net realizable value.
2. Prepare the entry to adjust the inventory account.
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PROBLEM 6
1. If the gross profit rate on sales is 20% what is the gross profit rate on cost?
2. If the markup is ¼ above cost what is the cost ratio?
3. If the gross profit rate is 33 1/3% on sales and the markup is 1,500,000, how much is cost of
sales?
4. If cost of sales is 2,400,000 and the markup is 33 1/3% on cost, how much is net sales?
5. If the cost ratio is 83 1/3% and cost of sales is 5,400,000, how much is the gross profit?
PROBLEM 7
The following data are taken from the records of Virus Department Store for the year 2019:
Inventory, January 1
Cost 2,333,000
Selling price 3,018,000
Purchases
Cost 38,950,000
Selling price 50,360,000
Freight in 535,000
Purchase discount 744,000
Purchase returns
Cost 156,000
Selling price 184,000
Markup 1,286,000
Markdown 1,772,000
Sales 48,588,000
Sales returns and allowances 339,000
Sales discount 475,000
Employee discounts 502,000
Markup cancelation 369,000
Markdown cancelation 108,000
REQUIRED
Compute the December 31, 2009 inventory using the retail inventory method applying:
1) Average cost approach 2) Conservative approach
Use two decimal places in computing the cost ratio
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PROBLEM 8
Lockdown Realty Company purchased a tract of raw land for 9,200,000. The land was
developed and subdivided into residential lots at a total cost of 16,000,000. The classification and unit
selling prices of the lots are as follows:
Class Number Of Lots Unit Selling Price
IM 75 160,000
PRI 60 150,000
SON 40 250,000
MENT 50 100,000
During the year, the number of lots sold was as follows: IM – 40; PRI – 30; SON – 20; and
MENT – 10. The commission paid was 5% of sales.
REQUIRED
Compute the following:
1. Unit cost of each of the lots unsold
2. Total cost of the ending inventory
3. Total sales
4. Total cost of the lots sold
5. Profit after commission

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1

2. What is consigned inventory?

3. Why is inventory included in the computation of net income?

5. In a periodic inventory system, the beginning inventory is

6. Which of the following is a characteristic of a perpetual inventory system?

7. Goods on consignment are included in the inventory of

9. Inventories shall be measured at

10. Net realizable value is

11. IFRS prohibits which of the following cost flow assumption?

Items counted in the store 5,643,200

1) Bought merchandise with a list price of 2,700,000. Terms: 2/10, n/30.

Item Units Cost Estimated Sales Price Cost To Sell

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