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QUIZ - INVENTORY
Problem

1. A retailer imported goods at a cost of 260,000, including 40,000 non-refundable import duties
and 20,000 refundable purchase taxes. The risks and rewards of ownership of the time imported
goods were transferred to the retailer upon collection of the goods from the harbor warehouse.
The retailer was required to pay for the goods upon collection. The retailer incurred 10,000 to
transport the goods to its retail outlet and a further 4,000 in delivering the goods to its customer.
Further selling costs of 6,000 were incurred in selling the goods.

What amount should the inventory be valued?

a. 240,000
b. 250,000
c. 260,000
d. 270,000

2. Davion Company is a manufacturing entity. The cost of an inventory is shown on its card as
follows:

Material 300,000
Production Labor 100,000
Production Overhead 50,000
General Administration 233,000
Marketing cost 212,000

What is the correct inventory value of the product?

a. 500,000
b. 450,000
c. 300,000
d. 1,000,000

3. Carebear Company purchased goods costing 1,000,000 on December 26, 2022. The terms
were FOB shipping point. The goods were received on December 28, 2022. Costs incurred by
the entity in connection with the purchase and delivery of the goods were normal freight charge
30,000,handling cost 20,000, insurance on shipment 5,000 and abnormal freight charge for
express shipping 12,000. What is the total cost of the inventory?
a. 1,050,000
b. 1,030,000
c. 1,055,000
d. 1,067,000

4. San Antonio Company provided the following data on December 31, 2022:
Items counted in the bodega 500,000
Items in receiving department, returned by
Customer, in good condition 80,000
Items in the shipping department 250,000

Compute for the correct amount of the inventory on December 31, 2022.
a. 500,000
b. 830,000
c. 580,000
d. 750,000
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5. Butter Company took a physical inventory at the end of the year and determined that 2,600,000
of goods were on hand. In addition, the entity determined that 200,000 of goods purchased in
transit shipped FOB shipping point were actually received 2 days after the physical count and
that the entity had 300,000 of goods out on consignment . What amount should be reported as
inventory at year-end?
a. 2,600,000
b. 2,800,000
c. 2,000,000
d. 3,100,000

6. Kasama Company conducted a physcial count on December 31, 2022 which revealed total cost
of 5,000,000.

However, the following items were excluded from the count:

• Goods costing 100,000 shipped by a vendor FOB shipping point on December 29, 2022
and received by Kasama Company on January 12, 2023.
• Goods in process costing 550,000 held by an outside processor for further processing.
• Goods sold to a customer which is being held for the customer to call for at the
customer's convenience with a cost of 400,000.
• A packing case containing a product costing 150,000 was standing in the shipping room
when the physical inventory was taken. It was not included in the inventory because it
was marked "hold for shipping instructions".

What is the correct inventory on December 31, 2022?

a. 6,200,000
b. 5,800,000
c. 5,650,000
d. 5,000,000

7. The management of Tris Company has engaged you to audit its 2021 financial statements. The
company’s accounting period ends on December 31. You verified that on November 30, the
correct inventory level was 60,000 units. A review of the December purchases orders to various
suppliers showed the following. Only merchandise received up to December 31, 2021 were
recorded as purchase by Tris.

Date of Invoice Date Quantity in Date Shipped Date Terms

Purchase Units Received
order
12-02-2021 01-04-2022 10,000 01-03-2022 01-04-2022 Shipping
point
12-11-2021 01-04-2022 12,000 12-22-2021 12-23-2021 Destination
12-14-2021 01-03-2022 14,000 12-28-2022 01-03-2022 Shipping
point
12-23-2021 12-26-2021 10,000 01-03-2022 01-04-2022 Shipping
point
12-28-2021 01-10-2022 8,000 12-31-2021 1-10-2022 Destination
12-31-2021 01-10-2022 15,000 01-04-2022 01-11-2022 Destination

During the month of December, the company recorded the sale of 50,000 units at P125 selling
price per unit. This includes the sale of 14,000 units shipped to Rose Company, a consignee. A
letter received from Rose Company indicates that as of December 31, 2021, it had sold 10,000
units and was still trying to sell the remaining units.
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Inventories presented on the client prepared statement of financial position pertain to inventories
actually on hand at yearend.

What is the number of units that should be included in the December 31,2021 inventory?
a. 40,000
b. 35,000
c. 30,600
d. 34,400

8. On April 1, 2022, Canon Company had 6,000,000units of merchandise on hand that cost P120
per unit. During the month, the entity had the following transactions with regard to the
merchandise:
April 5 Purchased on account 15,000 units at P140 per unit
8 Returned 1,000 units from the April 5 purchase
29 Sold on account 16,000 units at P200 per unit

The entity used a perpetual inventory system and a FIFO cost flow. What is the cost of goods
sold for April?
a. 2,120,000
b. 2,200,000
c. 2,144,000
d. 2,080,000

9. Massive Company provided the following information for the current year:
Units Unit cost Total cost
January 1 Inventory on hand 200 1,500 300,000
April 3 Purchase 300 1,750 525,000
October 1 Purchase 500 2,000 1,000,000
The entity sold 400 units on June 25 and 400 on December 10. What is the weighted average
cost of the inventory at year-end?
a. 350,000
b. 400,000
c. 730,000
d. 365,000

10. Sam Company purchased a plot of ground for 18,000,000. The entity also paid an independent
appraiser for the land the amount of 500,000. The land was developed as residential lots at a
total cost of 41,500,000. The lots were classified as follows:
Number of lots Sales price per lot
HIGHLAND 20 1, 000,000
MIDLAND 40 750,000
LOWLAND 100 500,000

What total cost should be allocated to Highland lots?

a. 13,000,000
b. 15,000,000
c. 13,500,000
d. 12,000,000

11. Kaila Corporation reported accounts payable on December 31, 2021 at 9,000,000 before any
necessary year-end adjustments relating to the following transactions:

• On December 28, 2021, Hanrou wrote and recorded checks to creditors totaling 4,000,000
causing an overdraft of 100,000 in Hanrou's bank account on December 31, 2021. The checks
were mailed on January 10, 2022.
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• On December 29, 2021, Hanrou purchased and received goods for 1,500,000, terms 2/10,
n/30. Hanrou records purchases and accounts payable at net amount. The invoice was recorded
and paid January 3, 2022.

• Goods shipped F. O. B. destination on December 20, 2021 from a vendor to Hanrou were
received January 2, 2022. The invoice cost was 650,000.

On December 31,2021, what amount should be reported as accounts payable?

a. 15,150,000
b. 14,500,000
c. 14,470,000
d. 15,107,000

12. Brady Corporation values its inventory at the lower of cost or net realizable value as required by
IFRS. Brady has the following information regarding its inventory:
Historical cost $1,000
Estimated selling price 900
Estimated costs to complete and sell 50
Replacement cost 800
What is the amount for inventory that Brady should report on the balance sheet under the lower
of cost or net realizable value method?
a. $1,000
b. $ 900
c. $ 850
d. $ 750

13. The Starla Corporation applies the lower of cost or net realizable value (NRV) inventory. Data
regarding the items in work-in-process inventory are shown below:
Shorts Pants
Historical cost P56,640 P90,000
Selling Price 108,800 108,000
Estimated cost to complete 14,400 20,400
Replacement Cost 50,400 95,400
Normal profit margin as percentage of selling price 25% 10%

Under the lower cost or NRV rule, the pants should be valued at?
a. 67,800 c. 87,600
b. 90,000 d. 95,400

14. Based on a physical inventory taken on December 31, year 2, Chewy Co. determined its
chocolate inventory on a FIFO basis at $26,000 with a replacement cost of $20,000. Chewy
estimated that, after further processing costs of $12,000, the chocolate could be sold as finished
candy bars for $40,000. Chewy’s normal profit margin is 10% of sales. Under the lower of cost
or market rule, what amount should Chewy report as chocolate inventory in its December 31,
year 2 balance sheet?
a. $28,000
b. $26,000
c. $24,000
d. $20,000

15. Balloon Company’s accounting records indicated the following information for 2020:
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Inventory , January 1 700,000

Purchases 3,000,000
Sales 3,500,000

A physical inventory taken on December 31, 2020 resulted in an ending inventory of P700,000.
The gross profit on sales has remained constant at 25% in recent years. The entity suspects
some inventory may have been taken by a new employee.

On December 31, 2020, what is the estimate cost of missing inventory?

a. 300,000
b. 375,000
c. 700,000
d. 0

16.
The following information appears in Libra’s Company’s record for the year ended December
31, 2020:
Inventory, January 1 700,000
Purchases 2,300,000
Purchase returns 100,000
Freight in 80,000
Sales 3,500,000
Sales discount 30,000
Sales returns 40,000

On December 31, 2020, a physical inventory revealed that the ending inventory was only
P400,000. The gross profit on sales has remained constant at 30% in recent years. The entity
suspects that some inventory may have been pilfered by one of the entity’s employees.

On December 31, 2020, what is the estimated cost of missing inventory?

a. 700,000
b. 151,000
c. 158,000
d. 420,000

17. A fire destroyed Jerome company's inventor on October 31. On January 1, the inventory had a
cost of 3,500,000. During the period January 2 to October 31, the entity had net purchases of
8,500,000 and net sales of 17,000,000. Undamaged inventory at the date of fire had a cost of
170,000. The mark up on cost is 66 2/3%. What was the cost of inventory destroyed by fire?
a. 1,630,000
b. 1,970,000
c. 1,550,000
d. 5,170,000

18. During the current fiscal year, Jeremiah Corp. signed a long-term noncancellable purchase
commitment with its primary supplier. Jeremiah agreed to purchase 2.5 million of raw materials
during the next fiscal year under this contract. At the end of the current fiscal year, the raw
material to be purchased under this contract had a market value of 2.3 million. What is the
journal entry at the end of the current fiscal year?
a. Debit Unrealized Holding Loss for 200,000 and credit Purchase Commitment Liability for
200,000.
b. Debit Purchase Commitment Liability for 200,000 and credit Unrealized Holding Gain for
200,000.
c. Debit Unrealized Holding Loss for 2,300,000 and credit Purchase Commitment Liability for
2,300,000.
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d. No journal entry is required.

19. The closing inventory of Rosario Company amounted P284,000 at December 31, 2017. This
total includes two inventory lines about which the inventory taker is uncertain.

Item 1- 500 items which had cost P15 each and which were included at P7,500. These items
were found to have been defective at the balance sheet date. Remedial work after the balance
sheet date cost P1,800 and they were then sold for P20 each. Selling expenses were P400.

Item 2- 100 items that had cost P10 each but after the balance sheet date, these were sold for
P8 each with selling expenses of P150.

What figure should appear in Rosario’s statement of financial position for inventory?
a. 283,650 c. 283,950
b. 284,000 d. 284,300

20. Turner Corporation acquired two inventory items at a lump-sum cost of 50,000. The acquisition
included 3,000 units of product LF, and 7,000 units of product 1B. LF normally sells for 15 per
unit, and 1B for 5 per unit. If Turner sells 1,000 units of LF, what amount of gross profit should it
recognize?
a. 1,875
b. 5,625
c. 10,000
d. 11,875

21. During the prior fiscal year, Jeremiah Corp. signed a long-term noncancellable purchase
commitment with its primary supplier to purchase 2.5 million of raw materials. Jeremiah paid the
2.5 million to acquire the raw materials when the raw materials were only worth 2.2 million.
Assume that the purchase commitment was properly recorded.

What is the journal entry to record the purchase?

a. Debit Inventory for 2,200,000, and credit Cash for 2,200,000.
b. Debit Inventory for 2,200,000, debit Unrealized Holding Loss for 300,000, and credit Cash
for 2,500,000.
c. Debit Inventory for 2,200,000, debit Purchase Commitment Liability for 300,000 and credit
Cash for 2,500,000.
d. Debit Inventory for 2,500,000, and credit Cash for 2,500,000.

22. During 2010, Larue Co., a manufacturer of chocolate candies, contracted to purchase 100,000
pounds of cocoa beans at 4.00 per pound, delivery to be made in the spring of 2011. Because a
record harvest is predicted for 2011, the price per pound for cocoa beans had fallen to 3.10 by
December 31, 2010.
Of the following journal entries, the one which would properly reflect in 2010 the effect of the
commitment of Larue Co. to purchase the 100,000 pounds of cocoa is
a. Cocoa Inventory.............................................................400,000
Accounts Payable................................................................. 400,000
b. Cocoa Inventory.............................................................310,000
Loss on Purchase Commitments......................................90,000
Accounts Payable................................................................. 400,000
c. Unrealized Holding Loss...................................................90,000
Purchase Commitments Liability.......................................... 90,000
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d. No entry would be necessary in 2010

23. On June 1, 2021, Ozz Company sold merchandise with the list price of 8,000,000 to Antonio
Company on account. Ozz allowed trade discounts of 20% and 10%.

Credit terms were 2/10, n/30 and the sale was made FOB shipping point. Ozz prepaid 50,000 of
delivery costs for Antonio as an accommodation.

1. What amount should be reported as sales revenue?

a. 5,760,000
b. 4,940,000
c. 5,648,000
d. 4,560,000

2. On June 11, 2021, what amount was received by Ozz from Antonio as remittance in full?
a. 5,644,000
b. 4,580,000
c. 5,694,900
d. 4,644,000

24. Joseph Factory started operations in 2021. Joseph manufactures bath towels. 60% of the
production are “Class A” which sell for P500 per dozen and 40% are “Class B” which sell for
P250 per dozen. During 2021, 6,000 dozens were produced at an average cost of P360 per
dozen. The inventory at the end of the year was as follows:

220 dozens “Class A” @ P360 P 79,200

300 dozens “Class B” @ P360 108,000
P187,200

Using the relative sales value method, which management considers as a more equitable basis
of cost distribution, answer the following:

1. How much of the total cost should be allocated to “Class A”?

a. 1,296,000
b. 1,620,000
c. 1,284,324
d. 925,714

2. How much of the total cost should be allocated to “Class B”?

a. 540,000
b. 875,676
c. 864,000
d. 1,234,286

3. How much is the value of inventory as of December 31, 2021?

a. 187,200
b. 187,946
c. 117,000
d. 166,500

4. How much is the cost of sales for the year 2021?

a. 1,972,800
b. 1,993,500
c. 2,043,000
d. 1,972,054
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5. How much is the gross profit for the year 2021?

a. 242,200
b. 406,500
c. 221,500
d. 242,946

25. Jerome Company reported that flood recently destroyed many of the financial records. The
entity used an average cost inventory valuation system. The entity made a physical count at the
end of each month in order to determine monthly ending inventory value. By examining various
documents, the ff. data are gathered:

Ending inventory at July 31 60, 000 units

Total cost of units available for sale in July 1, 452,100
Cost of goods sold during July 1, 164, 100
Cost of beginning inventory, July 1 4.00 per unit
Gross profit on sales for July 935, 900

Units Unit cost Total cost

July 5 55, 000 5.10 280, 500
11 53, 000 5.00 265, 000
15 45, 000 5.50 247, 500
16 47, 000 5.30 249, 100
Total Purchase p200, 000 1, 042, 100

1. What is the number of Units on July 1?

a. 100, 096
b. 102, 500
c. 134, 000
d. 103, 797

2. How many units were sold during the month of July?

a. 242, 500
b. 234, 000
c. 345, 987
d. 432, 987

3. What is the cost of the inventory on July 31?

a. 388, 000
b. 655, 000
c. 288, 000
d. 423, 000