Problem 10- 1 Amiable Company

Compute the correct amount of inventory:

Items counted in the bodega (bodega- warehouse)
Items included in count specifically segregated per sales contract
Items returned by the customer
Items ordered and in receiving department
Items shipped today, FOB Destination
Items for display
Items on counter for sale
Damaged and unsalable items included in count
Items in shipping department

Problem 10- 2 Natalia Company

Compute the correct amount of inventory:

Materials
Goods in process
Finished goods in factory
Finished goods in company-owned retail store (750,000/ 150%)
Finished goods in the hands of consignee (400,000 x 60%)
Finished goods in transit
Finished goods out on approval
Materials in transit (330,000 + 30,000)
Correct inventory

Problem 10- 3 Luminous Company

Finished goods
Finished goods held by salesmen
Goods in process (720,000/ 80%)
Materials
Materials returned to suppliers for replacement
Factory supplies (110,000 + 60,000)
Correct inventory

Problem 10- 4 Summer Company

a. Prepare journal entries, including adjustments to record the transactions assuming the company uses periodic sys

PERIODIC

1 Purchases (800 x 1000)

Accounts payable

2 Accounts payable
Purchase returns

3 Accounts payable (600 x 1000)

Cash

4 Accounts receivable (790 x 2000)

Sales

5 Sales return (20 x 2000)

Accounts receivable

6 Cash (680 x 2000)

Accounts receivable

7 Inventory, end
Income summary

b. Determine the cost of sales under each inventory system.

Inventory- January 1 90,000

Purchases 800,000
Less: Purchase returns (50,000) 750,000
Goods available for sales 840,000
Less: Inventory- December 31 (60,000)
Cost of sales 780,000
Problem 10- 5 Writer Company

Company A
List price 500,000
Less: First Trade Discount (20% x 500,000) (100,000)
400,000
Less: Second Trade Discount (10% x 400,000) (40,000)
360,000
Less: Third Trade Discount (10% x 360,000) (36,000)
Invoice Price 324,000
Less: Cash Discount (2% x 324, 000) (6,480)
Payment within discount period 317,520
shortcut: 500,000 x 80% x 90% x 90% x 98% 317,520

Problem 10- 6 Autumn Company

Gross Method

Purchases 4,750,000
Accounts payable 4,750,000

Freight In 250,000
Cash 250,000

Accounts payable (1617,000 / 98%) 1,650,000

Cash 1,617,000
Purchase discount 33,000

Accounts payable (3,717- 1,617) 2,100,000

Cash 2,100,000

NO ENTRY

Inventory 1,000,000
Income summary 1,000,000
 Gross Method
Purchases 4,750,000
Freight In 250,000
Total 5,000,000
Less: Purchase discount (33,000)
Goods available for sale 4,967,000
Less: Inventory- December 31 (1,000,000)
Cost of sales 3,967,000

Ending Inventory:
Gross Method (5M / 5) 1,000,000
Net Method (4905,000/ 5)

Coursework Problem 10-7 Fall Company

Problem 10- 8 Myriad Company

1 Inventory 50,000
Income Summary

2 Accounts payable 75,000

Purchases

3 Purchases 30,000
Accounts payable

Inventory 30,000
Income summary

4 Income summary 90,000

Inventory

5 Purchases 140,000
Accounts payable

27-Dec 28-Dec
Purchases Purchases
 AP AP

Inventory is understated
 4,000,000
(100,000)
50,000 Sales return Inventory
400,000 AR COGS
150,000
200,000
800,000
(50,000)
250,000
5,700,000

SP 750,000 150%
1,400,000 Cost 500,000 100%
650,000 Profit 250,000 50%
2,000,000
0,000/ 150%) 500,000 SP 400,000 100%
0,000 x 60%) 240,000 Cost 240,000 60%
250,000 Profit 40%
100,000
0,000 + 30,000) 360,000 Advances to Suppliers
5,500,000 Cash

2,000,000
100,000 SP 140,000 140%
0,000/ 80%) 900,000 Cost 100,000 100%
1,000,000 Profit 40,000 40%
100,000
0,000 + 60,000) 170,000
4,270,000
e company uses periodic system and perpetual system

PERPETUAL

800,000 Merchandise inventory

800,000 Accounts payable

50,000 Accounts payable

50,000 Merchandise invent

600,000 Accounts payable

600,000 Cash

1,580,000 Accounts receivable

1,580,000 Sales

Cost of sales
Merchandise invento

40,000 Sales return

40,000 Accounts receivable

Merchandise Inventory
Cost of sales

1,360,000 Cash
1,360,000 Accounts receivable

Inventory shortage
60,000 Merchandise invento
60,000

(given- 90 car seatcover x 1,000 each) Cost of sales recorded (790

Inventory shortage
Adjusted cost of Sales
Company B
List price 500,000
Less: Trade Discount (35% x 500,000) (175,000)
325,000
Less: Cash discount (2% x 325,000) (6,500)
Payment within discount period 318,500

500 x .65 x .98

Net Method

Purchases (4750 x 98%) 4,655,000

Accounts payable 4,655,000

Freight In 250,000
Cash 250,000

Accounts payable 1,617,000

Cash 1,617,000

Accounts payable (2.1M x 98%) 2,058,000

Purchase discount lost 42,000
Cash 2,100,000

Purchase discount lost 20,000

Accounts payable (1M x 2%) 20,000

Inventory 981,000
Income Summary 981,000
oss Method Net Method
4,655,000
250,000
4,905,000
-
4,905,000 Periodic and Perpetual
(981,000) Gross and Net
3,924,000

981,000

AP is correct, but the inventory is not correct

50,000

Purchases
75,000 AP

30,000

30,000

Correct
90,000 200

80
140,000 40
70 50

SHOULD BE 150

should be done on January 3

 held on- you are consignee
held OUT- you are consignor

Materials
Advances to Suppliers

Finished Goods Goods in Process

Direct Material prime costs
80% 720,000
Direct Labor
Factory Overhead 400,000 20% 180,000 conversion costs
INVENTORIABLE COST 2,000,000 100% 900,000
erchandise inventory (800 x 1000) 800,000
Accounts payable 800,000

ccounts payable 50,000

Merchandise inventory 50,000

ccounts payable (600 x 1000) 600,000

600,000

ccounts receivable (790 x 2000) 1,580,000

1,580,000

ost of sales (790 x 1000) 790,000

Merchandise inventory 790,000

(20 x 2000) 40,000

Accounts receivable 40,000

erchandise Inventory (20 x 1000) 20,000

Cost of sales 20,000

(680 x 2000) 1,360,000

Accounts receivable 1,360,000

ventory shortage 10,000

Merchandise inventory 10,000

ost of sales recorded (790,000-20,000) 770,000

ventory shortage 10,000
djusted cost of Sales 780,000
Gross: Net:

Accounts Payable Accounts Payable

4,750,000 4,655,000
1,650,000 1,617,000
2,100,000 2,058,000

1,000,000 980,000
20,000
1,000,000
980,000 1,000,000
20,000
Same cos
Not the same

Wrong
Sales 200

Beg Bal 80
Purchases 40
Ending 20 100

Reported Profit 100

Beginning Inventory 90
Purchases 800
Returned purchases (50)
Sold (790)
Returned sales 20
70
Physical count 60
10 shortage
 Table

Direct materials Direct Labor

wood salary of the personnel
1M= 10 pesos
Factory Overhead (Indirect materials and indirect labor)
nails
paint
rent for the space in doing the table
Problem 10- 9 Corolla Company

700,000 Materials
60,000 Irrecoverable purchase taxes
760,000 B

Problem 10- 10 Kerr Company

Total cost of inventory 500,000 D

Problem 10- 11 Seafood Company

Inventory at year-end 3,000,000

Purchases during the year 12,000,000
Percentage of REMAINING inventories 25%

Problem 10- 12 Stone Company

Inventory shipped on consignment 600,000

Freight paid 50,000
Consigned inventory 650,000 B

Problem 10- 13 Grimm Company

Number of freezers sold 10

Selling price per freezer 20,000
200,000 D

Problem 10- 14 Gray Company

List price 900,000

Trade discount (20% x 900,000) (180,000)
720,000
(10% x 720,000) (72,000)
Invoice Price 648,000
Freight In 50,000
Cost of purchase 698,000

Problem 10- 15 Brilliant Company

 Cost of purchases 5,000,000
Import duties 400,000
Freight and insurance 1,000,000
Other handling costs 100,000
Brokerage commission 200,000
Total cost of purchase 6,700,000

Problem 10- 16 Clem Company

Beginning inventory (1,100,000 + 120,000) 1,220,000

Purchases (4,800,000+600,000) 5,400,000
Freight In (100,000 + 50,000) 150,000
Total cost of goods available for sale 6,770,000
Less: Ending inventory (1,450,000 + 200,000) (1,650,000)
Cost of goods sold 5,120,000

Problem 10- 17 Rabb Company

Entry made: (Gross)

Purchases 1,000,000
Accounts payable 1,000,000

Accounts payable 700,000

Cash 692,000
Purchase discount 8,000

Problem 10- 18 Wine Company

Gross invoice 4,000,000

Purchase return (300,000)
Net purchases 3,700,000
Purchase discount rate x 2%
Purchase discount lost 74,000 A

Problem 10- 19 Hero Company

         6,000,000    based on physical count 

                       -     adjustment 1 
            300,000   adjustment 2 
         6,300,000   D 
Problem 10- 20 Empty Company

 Physical count      2,500,000 

 FOB SP- Dec 31, 2020 from a vendor         100,000 
 FOB SP- January 5, 2022- TO a vendor         400,000 
   3,000,000   D 

Problem 10- 21 Kew Company

Accounts payable per book

Goods lost in transit
Purchase return
Advance payment erroneously debited to Accounts Payable
Adjusted AP Balance

Problem 10- 22 Black Company

Accounts payable per book

Undelivered checks to creditors
Goods purchased and received on December 28, 2020
less: purchase discount (750,000 x 2%)

*** Adjusting entry for the undelivered checks:

Cash 2,000,000
Accounts Payable 2,000,000

Problem 10- 23 Joy Company

Physical count
Goods sold in transit, FOB Destination
Goods purchases in transit, FOB Shipping Point
Adjusted inventory

Problem 10- 24 Megan Company

Reported inventory
Goods sold in transit, FOB Destination
Goods purchased in transit, FOB Shipping Point
Correct amount of inventory
Problem 10- 25 Reverend Company

Physical count
Inventory marked "hold for shipping instruction"
Goods in process
Goods shipped by vendor FOB Seller (FOB Shipping Point)
Correct inventory

Problem 10- 26 Sundown Company

Inventory before adjustment

Goods purhcased FOB Shipping Point
Goods sold FOB Shipping Point
Goods sold FOB Destination
Goods purchased FAS
Goods sold FOB Destination
Correct December 31 inventory

Problem 10- 27 White Company

Net sales per book

Sales return
Goods shipped on December 31, 2020
Goods shipped on January 5, 2021 recorded on December 30, 2020
Adjusted net sales

Problem 10- 28 Purple Company

Gross sales
Estimated sales return (10% x 4M)
Net sales

Coursework

Problem 10-29 Yellow Company

Problem 10-30 Orange Company
Problem 10-31 Fancy Company
Problem 10-32 Quarry Company
Storage costs (in process)/ not completed yet INCLUDE
Storage costs (finished) EXCLUDE- Advertising expense
Recoverable purchase tax (VAT) EXCLUDE

Note: When goods are purchased FOB Destination, the seller is responsible for costs incurred in transporting goods
FOB Shipping Point = 500 +10+15+25

Shipping costs to be capitalized:

Shipping costs from overseas 1,500,000
Percentage of REMAINING inventories 25%
375,000 C

C
C

Should be entry: (Net) Correcting entry

Purchases (1M- 20k) 980,000
Accounts payable 980,000 Accounts payable
Purchase discount
Accounts payable 682,000 Purchase discount lost
Purchase discount lost 10,000 Purchases
Cash 692,000
2,200,000 Purchases Receivable from common carrier
40,000 AP Other Income
(70,000)
500,000
2,670,000 D

4,500,000
2,000,000 ***
750,000
(15,000) 735,000
7,235,000 C

4,410,000
380,000
510,000
5,300,000 A

2,000,000
200,000
300,000
2,500,000 A
5,000,000
500,000
300,000
50,000
5,850,000 C

7,600,000
250,000
(850,000)
260,000
350,000
840,000
8,450,000 D

5,000,000
(50,000)
300,000
(200,000)
5,050,000 A

4,000,000
(400,000)
3,600,000 A
ncurred in transporting goods to the buyer
 Accounts payable
2,000 300,000 balance before adjustment
8,000 2,000
10,000 298,000 A
20,000 A
m common carrier
lance before adjustment
Problem 11-1 Bronze Company

Units
1-Jan Balance on Hand 6,000
5-Jan Purchase 2,000
10-Jan Sale 4,000
15-Jan Sale 1,000
20-Jan Purchase 2,500
25-Jan Purchase 2,000
31-Jan Sale 3,000

FIFO
20-Jan Purchase (2500 x 300)
25-Jan Purchase (2,000 x 400)

Weighted average method- periodic

Units
1-Jan Balance on Hand 6,000
5-Jan Purchase 2,000
20-Jan Purchase 2,500
25-Jan Purchase 2,000
GOODS AVAILABLE FOR SALE 12,500

Problem 11-2 Furlough Company

FIFO- Periodic Units

Lot No. 4 500
Lot No. 5 14,500
15,000

Weighted average- periodic

Beginning Inventory 10,000
 Purchases: Lot NO. 1 2,000
Lot NO. 2 8,000
Lot NO. 3 6,000
Lot NO. 4 9,500
Lot NO. 5 14,500
Goods available for sale 50,000

Weighted average 15,000

Specific Identification
Lot No. 3 6,000
Lot No. 4 9,000
15,000

Goods available
FIFO 4,855,000
Weighted average 4,855,000
Specific Identification 4,855,000

Problem 11-3 Emcee Company

FIFO Units Unit Cost

17-Dec 10,000 45
22-Dec 20,000 43
30,000

Average Method
1-Dec 10,000 52
7-Dec 30,000 50
17-Dec 60,000 45
22-Dec 20,000 43
Available for Sale 120,000

Inventory 30,000 46.50

FIFO Average

Goods available for Sale 5,580,000 5,580,000

Less: Inventory- Deccember 31 1,310,000 1,395,000
Cost of goods sold 4,270,000 4,185,000
Problem 11-4 Gross Company

FIFO Units Unit Cost

Ending inventory 4,000 210

Cost of goods sold

Moving average
Units Unit Cost
1-Mar Beg Bal 1,000 270.00
6-Mar Purchase 3,000 250.00
Balances 4,000 255.00
9-Mar Sale (2,000) 255.00
Balances 2,000 255.00
14-Mar Purchase 6,000 280.00
Balances 8,000 273.75
25-Mar Purchase 4,000 210.00
Balances 12,000 252.50
31-Mar Sale (8,000) 252.50
BALANCES 4,000 252.50

Problem 11-5 Tragic Company

Purchases Sales Inventory Increment

2019 5,000 4,000 1,000
2020 9,000 7,000 2,000
2021 15,000 12,000 3,000
Total inventory- Dec 31, 2020 (units) 6,000

Sales
Cost of goods sold:
Inventory- December 31, 2019 (3,000 x60) 180,000
Purchases 15,000 x 75 1,125,000
Goods available for sale 1,305,000
Less: Inventory- December 31, 2020 (6,000 x 75) (450,000)
GROSS INCOME
 2020 2021

Cost of Goods Sold- Average 1,500,000 2,000,000

2020 Inventory Effect (150,000) 150,000
2021 Inventory Effect (200,000)
2022 Inventory Effect

Cost of Goods Sold- FIFO 1,350,000 1,950,000

Sales 3,000,000 4,000,000

COGS 1,350,000 1,950,000
Gross Income 1,650,000 2,050,000
Expenses 800,000 900,000
Net income 850,000 1,150,000

Coursework

Problem 11-6 Extreme Company

Problem 11-10 Apitong Company
Problem 11-11 Creature Company

Problem 11-15 Solid Company

Purchase price 18,000,000

Independent appraiser 500,000
Development cost 41,500,000
Total cost of inventory 60,000,000

Highland 20,000,000 0.20 12,000,000

Midland 30,000,000 3/10 18,000,000
Lowland 50,000,000 0.50 30,000,000
100,000,000
Unit Cost
150 900,000
200 400,000

Total Number of Units Sold 8,000

300 750,000 Total Number of Units AFS 12,500
400 800,000 Ending Inventory 4,500

FIFO
750,000
800,000
1,550,000 Cost of ending inventory, FIFO Method COGS- FIFO

8000 sold
Unit Cost Total Cost
150 900,000
200 400,000
300 750,000 COGS- Weighted average
400 800,000
2,850,000 8,000 sold x 228

228 AVERAGE UNIT COST

4,500 Inventory, end
1,026,000 Cost of ending inventory, Weighted Average Method

Unit Cost Total Cost 10,000 x 80 800,000

100 50,000 2,000 x 100 200,000
90 1,305,000 8,000 x 110 880,000
1,355,000 6,000 x 120 720,000
9,000 x 100 900,000
COGS- FIFO 3,500,000 4,855,000
80 800,000
 100 200,000
110 880,000
120 720,000
100 950,000
90 1,305,000
4,855,000 COGS- Weighted Average
35,000 97.10 3,398,500
97.10 1,456,500

120 720,000
100 900,000
1,620,000

Inventory- December 31 Cost of goods sold

1,355,000 3,500,000
1,456,500 3,398,500
1,620,000 3,235,000

Total Cost
450,000
860,000
1,310,000

520,000 Beg Inventory 10

1,500,000 Purchases 110
2,700,000 Sales 90
860,000 Ending Inventory 30
5,580,000

1,395,000
Total Cost Goods available for sale 14,000
840,000 Sold 10,000
Remaining Inventory 4,000
2,700,000

Average unit cost: 1,020,000/ 4,000 units

Total Cost
270,000
750,000
1,020,000 Average unit cost: 2,190,000/ 8,000 units
(510,000)
510,000 Average unit cost: 3,030,000/ 12,000 units
1,680,000
2,190,000
840,000 Cost of Goods Sold:
3,030,000 March 9 Sale 510,000
(2,020,000) March 31 Sale 2,020,000
1,010,000 2,530,000

Inventory
5,000
4,000
1,200,000 1,000
9,000
7,000
3,000
15,000
855,000 12,000
345,000 6,000
 2022

2,400,000

200,000
(270,000)

2,330,000

4,800,000
2,330,000
2,470,000
1,000,000
1,470,000

purchase price + directly attributable costs

600,000 cost per lot

450,000 cost per lot
300,000 cost per lot
 Total Units AFS Beg Bal + Purchases

6,000 900,000

2,000 400,000
1,300,000

d average

1,824,000

total cost of goods available for sale

4,855,000
1,000 270 270,000
3,000 250 750,000
6,000 280 1,680,000
2,700,000

WEIGHTED AVERAGE LIFO

1,000 270 270,000 1,020,000
3,000 250 750,000
6,000 280 1,680,000 2,520,000
4,000 210 840,000
14,000 3,540,000

252.8571
4,000
Ending Invty 1,011,429 COGS
FIFO

Weighted average
 Weighted Average
FIFO
Moving Average

10,000 252.8571 2,528,571.43

periodic SAME
perpetual

periodic
perpetual
Ending Inventory COGS Total
1,011,429 2,528,571.43 3,540,000
840,000 2,700,000 3,540,000
1,010,000 2,530,000 3,540,000

Total Goods Available for Sale

Coursework

Problem 11-16 Marsh Company

Problem 11-17 Jayson Company
Problem 11-18 Metro Company
Problem 11-19 Frey Company

Problem 11-20 Massive Company

Units Total Cost

1-Jan 200 300,000
3-Apr 300 525,000
1-Oct 500 1,000,000
Total 1,000 1,825,000
Less: Sales (400 + 400) (800)
Ending inventory 200

Average Unit Cost (1825,000 / 1,000) 1,825

Cost of ending inventory (200 x 1,825) 365,000

Problem 11-21 Jailbird Company

Units Unit Cost Total cost

January 31 balance 50,000 152.50 7,625,000 A

1-Jan B 16,000 140.00 2,240,000

5-Jan P 4,000 150.00 600,000
20,000 142.00 2,840,000
10-Jan Sale 15,000 142.00 2,130,000
5,000 142.00 710,000
15-Jan P 19,000 160.00 3,040,000
24,000 156.25 3,750,000
25-Jan Sale 4,000 156.25 625,000
20,000 156.25 3,125,000
31-Jan P 30,000 150.00 4,500,000
50,000 152.50 7,625,000

Problem 11-22 Yakal Company

 Cost of units available for sale for July 1,452,100
Purchases for July (1,042,100)
Cost of inventory- July 410,000

Number of units- July 1 (410,000/ 4) 102,500 A

July 1 Inventory 102,500

Purchases for July 200,000
Total units available for sale for July 302,500
July 31 inventory (60,000)
Units sold during the month of July 242,500 A

Average unit cost (1452,100/ 302,500) 5

Inventory- July 31 (60,000 x 4.80) 288,000 A

Alternative computation:
Cost of units available for sale for July 1,452,100
(1,164,100)
288,000

Problem 11-23 Diamond Company

RELATIVE SALES VALUE METHOD Cost- 12M + 3M = 15M

Sales price Fraction Allocated cost

A (100 x 240,000) 24,000,000 24/60 6,000,000
B (100 x 160,000) 16,000,000 16/60 4,000,000
C (200 x 100,000) 20,000,000 20/60 5,000,000
60,000,000 15,000,000

Problem 11-24 Elixir Company

Cost- 5,800,000 + 80,000 =

Sales price Fraction Allocated cost

A (10 x 100,000) 1,000,000 1000/8400 700,000
B (20 x 80,000) 1,600,000 1600/8400 1,120,000
C (40 x 70,000) 2,800,000 2800/8400 1,960,000
D (50 x 60,000) 3,000,000 3000/8400 2,100,000
8,400,000 5,880,000
Allocated cost of Class B 1,120,000
Clearing cost of Class B 100,000
Total cost 1,220,000
D

Average unit cost: 2840,000/ 20,000 units

t- 12M + 3M = 15M

ocated cost
C

t- 5,800,000 + 80,000 = 5,880,000

ocated cost
B
Problem 12-1 Longhorn Company

Units Unit Cost

A 1,000 120
B 1,500 110
C 1,200 150
D 1,800 140
E 1,700 130

Problem 12-2 Prime Company

Product Unit Cost

1 700
2 475
3 255
4 450

Problem 12-3 Winter Company

Cost
Skis 2,200,000
Boots 1,700,000
Ski equipment 700,000
Ski apparel 400,000
5,000,000

Direct Method:
Ending inventory 4,800,000
Income summary

Allowance method:
Loss on inventory writedown 200,000
Allowance for inventory writedown

Coursework

Problem 12-4 White Company

Problem 12-5 Altis Company

September 30 (40,000 x 75)

December 31 (10,000 x 90)
Total FIFO Cost
NRV (50,000 x 72)
Required allowance for inventory writedown

Inventory- January 1 (20,000 x 60)

Purchases
Purchase discount
Goods available for sale
Less: Inventory- December 31
Cost of goods sold before reversal of inventory writedown
Gain on reversal of inventory writedown
Cost of goods sold after inventory writedown

Journal entries:
Inventory- December 31
Income Summary

Allowance for inventory writedown (400,000-300,000)

Gain on reversal of inventory writedown

Problem 12-6 Savior Company

a. No adjustment is necessary because the market price is higher than the agreed price.
Any gain on purchase commitment is not recognized initially.

b. No adjustment is necessary because the market price has not declined as of December 31, 2021.
The market decline is only a possible loss.

c. Loss on purchase commitment (10,000 x 30)

Estimated liability for purchase commitment

d. December 31, 2021:

Loss on purchase commitment (10,000 x 30)
Estimated liability for purchase commitment

January 31, 2022:

 Purchases (100,000 x 150)
Loss on purchase commitment
Estimated liability for purchase commitment
Accounts payable/ Cash

e. December 31, 2021:

Loss on purchase commitment (10,000 x 30)
Estimated liability for purchase commitment

January 31, 2022:

Purchases (10,000 x 200)
Estimated liability for purchase commitment
Accounts payable/ Cash
Gain on purchase commitment

Problem 12-7 Planter Company

Loss on purchase commitment (55-50) x 100,000

Estimated liability for Purchase Commitment

Purchases (100,000 x 54)

Estimated liability for Purchase Commitment
Accounts payable
Gain on Purchase Commitment

What if:
20,000 barrels were actually delivered on March 31, 2022

Purchases (20,000 x 54) 1,080,000

Estimated Liability (500,000 x 20/100) 100,000
AP (20,000 x 55)
Gain Purchase Commitment
 (Lower of cost or NRV)
NRV Inventory Value
150 120,000
120 165,000
140 168,000
160 252,000
160 221,000
926,000

(Lower of cost or NRV)

NRV Inventory Value
650 650
745 475 NRV= Estimated selling price- cost to sell
250 250
740 450

NRV LCNRV
2,500,000 2,200,000 Purchases/ Inventory 5,000,000
1,500,000 1,500,000 Cash/ AP 5,000,000
800,000 700,000
500,000 400,000
5,300,000 4,800,000

4,800,000

200,000
 3,000,000
900,000 TGAS 150,000
3,900,000 Sold 100,000 Beg Bal
3,600,000 50,000 ending inventory 31-Mar
300,000 30-Jun
30-Sep
1,200,000
9,400,000 (1,950,000 + 2,800,000 + 3,750,000 + 900,000)
(400,000)
10,200,000
3,900,000
6,300,000
(100,000) Allowance for Inventory Writedown
6,200,000 400,000 Beg Bal
workback 100,000

300,000 REQUIRED BALANCE

3,900,000
3,900,000

100,000
100,000

her than the agreed price.

ot declined as of December 31, 2021.

300,000
300,000

200-170 = 30 300,000 What is the loss to be record

300,000 What is the loss to be record
What is the total loss of the p
 1,500,000
(170-150) x 10,000 200,000
300,000
(10,000 x 200) 2,000,000

300,000
300,000 What is the loss to be record
What is the gain to be record
What is the loss to be record
2,000,000 What is the total loss of the p
300,000 What is the total gain of the
2,000,000
300,000

500,000
500,000

5,400,000
500,000
5,500,000
400,000

1,100,000
80,000
 20,000
30,000
40,000
10,000
100,000

September 30 total 50,000

YOU CANNOT RECOVER WHAT YOU HAVE NOT LOST.

QUIRED BALANCE

hat is the loss to be recorded in 2022? 200,000

hat is the loss to be recorded in 2021? 300,000
hat is the total loss of the purchase commitment? 500,000
hat is the loss to be recorded in 2022? -
hat is the gain to be recorded in 2021? -
hat is the loss to be recorded in 2021? 300,000
hat is the total loss of the purchase commitment? 0
hat is the total gain of the purchase commitment? 100,000
E NOT LOST.
Problem 12-8 Harris Company

Lower of Cost and Net Realizable Value

Cost 1,200,000
Net Realizable Value (1.3M- 150k) 1,150,000 B

Problem 12-9 Aloha Company

Lower of Cost and Net Realizable Value

Cost 2,000,000
Net Realizable Value 1,800,000 C

Problem 12-10 Cherry Company

Estimated Sales Price 4,000,000

Cost to Complete (1,200,000)
Net realizable value 2,800,000

FIFO Cost (lower than NRV) 2,600,000

Problem 12-11 Gatekeeper Company

Question 1 3,200,000

Question 2 3,300,000

Cost (Materials an NRV Lower

Product X 1,500,000 1,400,000 1,400,000
Product Y 1,800,000 2,300,000 1,800,000
3,300,000 3,700,000 3,200,000

Problem 12-12 Starstruck Company

Units Unit cost NRV per unit

Sofas 100 1,000 1,020
Dining tables 200 500 450
Beds 300 1,500 1,600
Closets 400 750 770
Lounge chains 500 250 200
Problem 12-13 Gem Company

Historical cost NRV Value

Markers 240,000 312,000 240,000
Pens 188,000 200,000 188,000
Highlighters 300,000 292,000 292,000
720,000

Problem 12-14 Gem Company D. 250,000

Problem 12-15 Uptown Company D. 4,920,000

Problem 12-16 Gorgeous Company B. 100,000

Coursework
Problem 12- 17 North Company

Problem 12-18 Diamond Company

Purchases (10,000 x 300) 3,000,000

Estimared liability 400,000
Accounts payable (10,00 x 310)
Gain on purchase commitment

1.A (310-270) x 10,0000

2. B
3. A
4. B
B

A Prime costs Direct Material + Direct Labor

Conversion costs Direct Labor + Factory Overhead

Manufacturing Cost DM + DL + OH

100,000
90,000
450,000
300,000
100,000
 1,040,000 A

3,100,000
300,000
Problem 13-1 Gecelle Company

Beginning inventory 500,000

Net purchases 2,500,000
Goods available for sale 3,000,000
Cost of sales (75% x 3.2M) 2,400,000
SHOULD BE INVENTORY 600,000
Based on Physical count 575,000
Cost of missing inventory 25,000 D

Problem 13-2 Lin Company

Beginning inventory 2,000,000

Net purchases 5,200,000
Goods available for sale 7,200,000
Cost of sales (70% x 8M) 5,600,000
SHOULD BE INVENTORY 1,600,000 C
(all destroyed by fire)

Problem 13-3 Avarice Company

Inventory- January 1
Purchases 3,200,000
Freight In 50,000
Total 3,250,000
Less: Purchase returns (75,000)
Goods available for sale
Less: Cost of goods sold (4500,000 x 60%)
Inventory- March 31

Problem 13-4 Celibacy Company

Sales
Sales returns
Net sales

The sales discounts are ignored for purposes of estimating inventory under the gross profit me

Inventory- January 1
Purchases
 Purchases returns
Freight In
Goods available for sale
Cost of goods sold (70% x 3,370,000)
Inventory- December 31
Physical inventory- December 31
Cost of missing inventory

Problem 13-5 Pamela Company

Sales
Sales returns
Net Sales

Cost of goods sold (75% x 5,200,000)

Like sales discounts, sales allowances are ignored in determining net sales under the gross profi

Problem 13-6 Elusive Company

Inventory- January 1
Net purchases
Goods available for sale
Cost of goods sold (7,280,000 / 130%)
Inventory- September 30
Realizable value of damaged goods
Fire loss on inventory

Problem 13-7 Karen Company

Beginning inventory
Purchases
Freight In
Purchase returns and allowances
Purchase discounts
Cost of goods available for sale

Sales
Sales return
Net sales
Multiply by cost ratio
Cost of goods sold
 Net sales
Gross profit rate on sales
Cost ratio

Sales allowances and sales discounts are ignored in determining net sales under the gross profi

Cost of goods available for sale

Cost of goods sold
Ending inventory
Physical count
Cost of goods out on consignment (1,000,000 x 60%)
Cost of inventory shortage

Problem 13-8 Claire Company

Gross Profit Rate for 2020:

Beginning Inventory -
Purchases 5,600,000
Purchase Returns (100,000)
Ending Inventory* (1,000,000)
Cost of Sales 4,500,000

Analysis:
Sales 6,000,000 100%
COS 4,500,000 75%
Gross Profit 1,500,000 25% gross profit based on SALES

Gross Profit Rate for 2021:

5% higher then 2020. So, if in 2020, there is 25% GPR, we have 30% in 2021

For 2021, if the sales is 9M, then, the assumed cost of that sale is:
Sales 9,000,000
COS 6,300,000 70%
Gross Profit 2,700,000 30%

Coursework
Problem 13-9 Braveheart Company

Problem 13-10 Paragon Company

 Average gross profit rate:
Total of Net Sales (2017- 2019) 9,000,000
Total of Cost of Sales (2017- 2019) 6,750,000
2,250,000

Inventory- January 1 660,000

Net purchases 4,240,000
Goods available for sale 4,900,000
Less: COGS (5.6M x 75%) 4,200,000
Inventory- September 30 700,000
Less: Undamaged goods (60,000 x 75%) 45,000
Realizable value of damaged goods 25,000 70,000
Fire loss 630,000

Problem 13-11 Fairy Company

Sales- 2019 7,500,000

Cost of goods sold:
Beg. Inventory 1,260,000
Purchases 6,450,000
Freight in 350,000
Purchase discount (90,000)
Purchase returns (120,000)
Purchase allowances (20,000)
Goods available for sale 7,830,000
Ending inventory (2,355,000) 5,475,000
Gross profit 2,025,000

Beginning inventory- 2019 2,355,000

Purchases 3,180,000
Freight in 220,000
Purchase discount (45,000)
Purchase returns (40,000)
Purchase allowances (15,000)
Goods available for sale 5,655,000
Cost of goods sold (4500,000 x 73%) 3,285,000
ENDING INVENTORY- 2020 2,370,000

Problem 13-12 Unanimous Company

Net sales in 2019 (8,200,000- 200,000) 8,000,000

 Less: COS
Beginning inventory 2,000,000
Net purchases in 2019 4,800,000
Goods available for sale 6,800,000
Less: Ending inventory 1,200,000 5,600,000
Gross Profit 2,400,000

Inventory, January 1, 2020 1,200,000

Net purchases- 2020 4,960,000
Goods available for sale 6,160,000
Less: COS
Sales 7,880,000
Less: Sales return and allowances 80,000
Net sales 7,800,000
COS. (7,800,000 x 70%) 5,460,000
Estimated value of ending inventory 700,000
Less: Cost of inventory not stolen 100,000
Estimated cost of stolen inventory 600,000

Problem 13-13 Wholesome Company

Sales 9,600,000
Cost of goods sold (9.6M / 125%) 7,680,000
Gross Profit 1,920,000

Coursework

Problem 13-14 Regatta Company

Problem 13-17 Waterloo Company
 Sales 3,200,000 100%
Cost ??? 75%
25%

650,000
Sales 100%
COS 60%
GP 40%
3,175,000
3,825,000
2,700,000
1,125,000 A

3,400,000
(30,000)
3,370,000 NET SALES 3,350,000

entory under the gross profit method.

650,000
2,300,000
 (80,000) Sales 100% 3,370,000
60,000 COS 70% 2,359,000
2,930,000 GP 30%
(2,359,000)
571,000
420,000
151,000 A

5,600,000
(400,000)
5,200,000 Sales 5,600,000
Sales Return 400,000
3,900,000 C 5,200,000 100%
3,900,000 75%
ng net sales under the gross profit method. 25%

1,100,000
6,000,000 Sales 130% 7,280,000
7,100,000 COS 100% 5,600,000
(5,600,000) GP 30%
1,500,000
(100,000)
1,400,000 B

5,000,000
26,000,000
2,000,000
(3,500,000)
(1,500,000)
28,000,000 A
Gross Profit based on SALES
40,000,000
(3,000,000) Sales 100%
37,000,000 COS 60%
60% GP 40%
22,200,000 B
 100%
40%
60%

g net sales under the gross profit method.

28,000,000
(22,200,000)
5,800,000 1,000,000 Selling Price 100%
(4,000,000) ??? Cost 60%
(600,000)
1,200,000 C

*the ending inventory of 2020 is the beginning inventory of 2021.

To compute for the fire loss, let us compute the cost of goods availab
Beginning Inventory
d on SALES Purchases
Purchase returns
Goods Available for Sale
PR, we have 30% in 2021
Then, deduct the SOLD goods
Then, deduct the COST of recovered mdse
Undamaged: 500,000 x 70% cost ratio
Damaged NRV- 10,000
FIRE LOSS

40%
 100%
75%
25% Sales 5,600,000
COS ?? 4,200,000
GP 1,400,000 25%

2019

Sales 7,500 100%

COGS 5,475 73%
GP 2,025 27%

73%
27%
2020

Sales 4,500 100%

COGS 3,285 73%
27%

A
 70%
30%

Sales 9,600 125%

COS 7,680 100%
B 1,920 25%
4,500,000
2,700,000
Inventory- January 1 1,100,000
Net purchases 6,000,000
Goods available for sale 7,100,000
Cost of goods sold (7,280,000 / 130%) (5,600,000)
Inventory- September 30 1,500,000
Realizable value of UNdamaged goods (76,923)
Fire loss on inventory 1,423,077

Gross Profit based on COST

Sales 140%
COS 100%
GP 40%
ute the cost of goods available for sale:
1,000,000
8,000,000
(500,000)
8,500,000

(6,300,000)

(350,000)
(10,000)
1,840,000 B

GP
 60,000
??? 45,000
15,000

gross profit rate based on SALES

100,000.00 130%
76,923.08 100%
Books

Beginning Inventory
Purchases

Number of books sold

Physical count

SHOULD BE

LOST???

Books

Beginning Inventory
Purchases
Number of books sold

Physical count

SHOULD BE

LOST???

Beginning Inventory
Purchases
Purchase Return
Freight In
Sales discount
Sales Return
Net Sales

GPR on Sales
Ending Inventory

Cost of missing inventory?

damaged- deduct AS IS
undamaged-
SP 125 GPR
Cost 100
GP 25
GPR 20%

Sales 18750
20 pcs. 2000 Cost 15000
300 pcs 30000
320 books AFS 32000

150 18750

160 books left Beg. Invty

Purchases
170 AFS
Cost of Sales

10 books x 100 1000 Physical count

Loss

SP 125 GPR
Cost 100
GP 25 GROSS SALES 18750
GPR 20% SALES RETURN 250
SALES DISCOUNT 185
NET SALES 18315
20 pcs. 2000
300 pcs 30000 SALES 18500
 320 books AFS 32000 Cost 14800
1% Discount
148 18500 18315 NET SALES

160 books left Beg. Invty

Purchases
172 AFS
Cost of Sales

12 books x 100 1,200.00 Physical count

1 125 Loss
1,075.00

1,300,000 TGAFS 5,860,000

4,600,000 COS 4746000
160,000 Ending Inv 840,000
120,000 274,000
40,000 274,000
60,000
6,740,000

30% Sales 100%

840,000 Cost 70%
GP 30%

inventory?

maged- deduct AS IS
cost
 (150 x 100)

2000
30000
32000
15000
17000 (170 x 100)
16000
1000

(150 X 125)
(2 X 125)

100%
(148x 100) 80%

2000
30000
32000
14800
17200 (170 x 100)
16000
1,200.00