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B. It May Be Used To Estimate Inventories For Annual Statements

This document contains 10 multiple choice questions about inventory valuation methods, calculating inventory losses due to fire, and estimating missing or lost inventory. It provides financial information like inventory amounts, purchases, sales, and cost percentages to help calculate the answers.

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Gray Javier
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111 views2 pages

B. It May Be Used To Estimate Inventories For Annual Statements

This document contains 10 multiple choice questions about inventory valuation methods, calculating inventory losses due to fire, and estimating missing or lost inventory. It provides financial information like inventory amounts, purchases, sales, and cost percentages to help calculate the answers.

Uploaded by

Gray Javier
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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BSA 32

6. Which statement is not true about the gross profit method of inventory valuation?
a. It may be used to estimate inventories for interim statements. c. It may be
used by auditors.
b. It may be used to estimate inventories for annual statements. d. None of
these.

7. Mark Company requests your assistance in determining the amount of loss and in
filing in insurance claim in connection with a fire on June 15, 2012 that destroyed some
of the company’s inventory and accounting records. You were able to obtain the
following information from available records. The last physical inventory was taken on
December 31, 2011. At the time, total (at cost) amounted to P210,789.80. Accounts
payable were P110,106.42 on December 31, 2011 and P126,945.37 at the time the fire
occurred. Payments to vendors from December 31, 2011 to the date of fire totalled
P641,871.56. All sales are on account and account receivable were P135,009.18 at
December 31, 2011 to the date of fire amounted to P876,195.50. Almost all the
merchandising items sold approximately 30% in excess of cost. As at June 15, 2012,
the total cost of inventory items not destroyed by the fire amounted to P144,882.33.
How much is the loss incurred by the company as a result of the fire?
a. P72,055.23 b. P216,937.56 c. P275,668.21 d.
P430,785.88

8. A physical inventory taken on December 31, 2012 resulted in an ending inventory of


P1,440,000. Rommar Company suspects some inventory may have been taken by
employees. To estimate the cost of missing inventory, the following were gathered:
Inventory, Dec. 31, 2011 P1,280,000; Purchases during 2012 5,640,000; Cash sales
during 2012 1,400,000; Shipment received on December 26, 2012, included in physical
inventory, but not recorded as purchases 40,000; Deposits made with suppliers, entered
as purchases. Goods were not received in 2012 80,000; Collections on accounts
receivable, 2012 7,200,000; Accounts receivable, January 1, 2012 1,000,000; Accounts
receivable, Dec. 31, 2012 1,200,000; Gross profit percentage on sales 40%. At
December 31, 2012 what is the estimated cost of missing inventory?
a. P200,000 b. P160,000 c. P240,000 d. P320,000

9. Flynn Sales Company uses the retail inventory method to value its merchandise
inventory. The following information is available for the current year:
Cost Retail
Beginning inventory 30,000 50,000
Purchases 145,000 200,000
Freight-in 2,500 —
Net markups — 8,500
Net markdowns — 10,000
Employee discounts — 1,000
Sales — 205,000
If the ending inventory is to be valued at the lower-of-cost-or-market, what is the
cost to retail ratio?
a. 71%
b. 68.67%
c. 67.31%
d. 71.43%

10.Reymond Corporation had the following amounts, all at retail:


Beginning inventory P 3,600 Purchases P120,000
Purchase returns 6,000 Net markups 18,000
Abnormal shortage 4,000 Net markdowns 2,800
Sales 72,000 Sales returns 1,800
Employee discounts 1,600 Normal shortage 2,600
What is Reymond’s ending inventory at retail?
a. P54,400 b. P56,000 c. P57,600 d. P58,400

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