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    Illustration Inventories Part II

    Uploaded by

    Riyhu Delamerced
    The document provides 4 illustrations with calculations related to inventory accounting: 1) Computation of gross profit rates given sales and cost of goods sold amounts. 2) Estimation of inventory loss due to a flood using beginning inventory, purchases, sales, and other transaction data. 3) Calculation of destroyed work-in-process inventory given raw materials, finished goods, purchases, and production costs. 4) Use of the retail method to determine cost of goods sold and ending inventory from cost and retail amounts of inventory transactions.

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    Illustration Inventories Part II

    Uploaded by

    Riyhu Delamerced
    40 views2 pages
    The document provides 4 illustrations with calculations related to inventory accounting: 1) Computation of gross profit rates given sales and cost of goods sold amounts. 2) Estimation of inventory loss due to a flood using beginning inventory, purchases, sales, and other transaction data. 3) Calculation of destroyed work-in-process inventory given raw materials, finished goods, purchases, and production costs. 4) Use of the retail method to determine cost of goods sold and ending inventory from cost and retail amounts of inventory transactions.

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    The document provides 4 illustrations with calculations related to inventory accounting: 1) Computation of gross profit rates given sales and cost of goods sold amounts. 2) Estimation of inventory loss due to a flood using beginning inventory, purchases, sales, and other transaction data. 3) Calculation of destroyed work-in-process inventory given raw materials, finished goods, purchases, and production costs. 4) Use of the retail method to determine cost of goods sold and ending inventory from cost and retail amounts of inventory transactions.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    40 views2 pages

    Illustration Inventories Part II

    Uploaded by

    Riyhu Delamerced
    The document provides 4 illustrations with calculations related to inventory accounting: 1) Computation of gross profit rates given sales and cost of goods sold amounts. 2) Estimation of inventory loss due to a flood using beginning inventory, purchases, sales, and other transaction data. 3) Calculation of destroyed work-in-process inventory given raw materials, finished goods, purchases, and production costs. 4) Use of the retail method to determine cost of goods sold and ending inventory from cost and retail amounts of inventory transactions.

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    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 2

    FAITH COLLEGES

    INTACC1

    INVENTORIES (PART II)

    Illustration I (Gross Profit Rate, GPR)

    a. Compute for the gross profit rates of an entity with sales of P1,000 and cost of goods sold of P800.
    b. If GPR based on cost is 25%, what is the GPR based on sales?
    c. If GPR based on sales is 20%, what is the GPR based on cost?

    Illustration II (Inventory Estimation)

    On October 1, 2019, a flood destroyed the warehouse of ABC Co. and all the inventories contained therein. Off-site back up of data base
    shows the following information

    Inventory, Jan. 1 P14,500


    Accounts Payable, Jan 1 6,000
    Accounts Payable, Sept. 30 3,000
    Payment to Supplier 50,000
    Freight in 5,000
    Purchase returns and discounts 2,500
    Sales from Jan – Sep 75,000
    Sales returns 5,000
    Sales discounts 2,000
    Gross profit rate based on sales 20%

    Additional information
    Goods in transit on October 1, 2019 amounted to P2,000 while goods out on consignment were P1,200. Damaged materials can be sold at
    a salvage value of P500.

    Compute for the inventory loss due to the flood.

    Illustration III (Inventory loss in manufacturing setup)

    On June 1, 2019, a fire completely destroyed the WIP inventories of ABC Manufacturing, Inc. The following amounts were determined:

    Jan. 1, 2019 June 1, 2019


    Accounts Payable 78,000 90,000
    Raw materials 10,000 7,000
    WIP 40,000 ?
    Finished goods 46,000 58,000

    The following was determined


    a. Payments to suppliers for purchase on account, P40,000
    b. Freight on purchases, P5,000
    c. Purchase returns, P5,000
    d. Direct labor, P32,000
    e. Production overhead, P12,000
    f. Sales from Jan 1 – May 31, P150,000
    g. Sales returns, P30,000
    h. Sales discounts, P10,000
    i. GPR based on sales, 25%

    Compute for the WIP destroyed by fire

    Illustration IV (Retail method)

    Presented below is information pertaining to ABC Co.

    Page 1 of 2
    FAITH COLLEGES
    INTACC1
    Cost Retail
    Inventory, January 1 8,700 14,000
    Purchases 55,300 80,300
    Freight-in 2,000 -
    Purchase discounts 500 -
    Purchase returns 5,200 8,600
    Departmental Transfers-In (Debit) 1,000 1,500
    Departmental Transfers-Out (Credit) 800 1,200
    Markups 6,000
    Markup cancellations 2,000
    Markdowns 12,000
    Markdown cancellations 3,000
    Abnormal spoilage (theft and casualty loss) 5,000 7,000
    Sales 43,800
    Sales returns 2,500
    Sales discounts 1,000
    Employee discounts 500
    Normal spoilage (shrinkage and breakages) 200

    Compute for the COGS and Ending Inventory using the Average Cost and FIFO Method

    Page 2 of 2

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