San Beda College Alabang

College of Arts and Sciences

Accountancy Department
Leonald C. Tapia, CPA

Seatwork (Solution)

1. Spicy Corporation purchased merchandise with a list price of P150,000. The list price is subject to
15%, 10%, 5% trade discount. The credit term is 2/15, n/45.

(a) What was the invoice price of the merchandise? P109,012.50

(b) How much was the cash payment if paid within the discount period? P106,832.25

Solution: (a) 150,000 x .85 x .9 x .95 = 109,012.50

(b) 109,012.5 x .98 = 106,832.25

2. Mommy Divine buys sweaters from Guidicelli Inc in Italy. The invoice stated a list price of P90,000
and with an allowed trade discount of 20%, 10% from the list price. The invoice included a freight
charge of P5,000. Upon receiving the package in the carrier’s hub, Mommy Divine incurred
another shipping fee of P1,000 to carry the package to her store. The company also incurred
P1,500 to build a rack to store the sweaters.

What is the total cost of inventory purchased? P70,800

Solution: Invoice price = 90,000 x .8 x .9 = 64,800

Total cost of purchase:
Invoice price 64,800
Freight Charges 5,000
Shipping Fee 1,000
Total 70,800

3. Kimchi Inc has incurred the following cost relating to the purchase of merchandise:

Cost of purchase in the invoice P5,000,000

Trade discounts on purchases already deducted from the invoice 500,000X
Import Duties 400,000
Freight and insurance on purchase 1,000,000
Other handling cost relating to imports 100,000
Salaries of Accounting Department 600,000X
Broker’s fee for arranging the imports 200,000
Sales commission paid to sales agent relating so sales 300,000X
After-sales warranty costs 250,000X
Repairs and maintenance expense of the office 100,000X
Ongoing and regular inspection fees 50,000X

What is the total cost of purchase? P6,700,000

Cost of purchase in the invoice P5,000,000

Import Duties 400,000
Freight and insurance on purchase 1,000,000
Other handling cost relating to imports 100,000
Broker’s fee for arranging the imports 200,000
Total Cost of Purchase 6,700,000
San Beda College Alabang
College of Arts and Sciences
Accountancy Department
Leonald C. Tapia, CPA

4. At the beginning of the week, Store For All Season, a convenience store, received a 100 boxes of
hard cookies on consignment from Oven Sesame Bakery. The cost per box of cookies is P75
and to be sold at P100 per box. The commission of the Store from the sale of consigned goods is
5%. At the end of the week, 10 boxes of cookies were unsold.

What amount should be reported as payable for consigned goods? P8,550

Units Sold:
Beginning units 100
Unsold units 10
Units sold 90

Payable: 90 units x 100 = 9,000 x .95 = P8,550

5. Mimi Company has the following information on December 31, 2019:

Purchases (at list price) P900,000

Beginning Inventory 100,000
Ending Inventory 50,000
Freight in 5,000
Freight out 7,500
Delivery and Handling Costs 2,000
Storage Costs 10,000
Selling Expenses 15,000
Goods held for consignment (at cost)- beginning 100,000
Goods held for consignment (at cost)- ending 20,000
Goods out on consignment (at Selling price)- Beginning 190,500
Goods out on consignment (at Selling price)- Ending 15,000

The purchases of Mimi Company is subject to 10% trade discount per list price.
The gross profit rate of the company including the consigned goods is 30% on cost.
The consignee of Mimi Company receives 10% commission on the sale of the consigned goods.

How much is the cost of sales of Mimi Company as at December 31, 2019? P1,012,000

Beginning Inventory P100,000

Purchases:
Invoice price (900,000 x .9) 810,000
Freight in 5,000
Delivery and Handling Costs 2,000 817,000
Total Available inventory 917,000
Storage Cost 10,000
Goods Available for sale 927,000
Less: Ending Inventory 50,000
Cost of Sales 877,000

Cost of sales for consigned goods (Consignor):

Goods out on consignment (at Selling price)- Beginning 190,500
Less: Goods out on consignment (at Selling price)- Ending 15,000
Sales of Consigned goods 175,500
Divide: 1.30
Cost of Sales - Consigned 135,000

Total Cost of Sales = 877,000 + 135,000 = 1,012,000

San Beda College Alabang
College of Arts and Sciences
Accountancy Department
Leonald C. Tapia, CPA

6. The following purchase transactions occurred during the last few days of Lala Company's business
year, which ends October 31, or in the first few days after that date. A periodic inventory system is
used.

• An invoice for P6,000, terms FOB shipping point, was received and entered November 1. The
invoice shows that the material was shipped October 29, but the receiving report indicates
receipt of goods on November 3.

• An invoice for P2,700, terms FOB destination, was received and entered November 2. The
receiving report indicates that the goods were received October 29.

• An invoice for P3,150, terms, FOB shipping point, was received October 15, but never entered.
Attached to it is a receiving report indicating that the goods were received October 18. Across
the face of the receiving report is the following notation: Merchandise not of same quality as
ordered returned for credit October 19.

• An invoice for P3,600 terms FOB shipping point, was received and entered October 27. The
receiving report attached to the invoice indicates that the shipment was received October 27 in
satisfactory condition.

• An invoice for P4,800, terms FOB destination, was received and entered October 28. The
receiving report indicates that the merchandise was received November 2.

lnventory was determined by physical count on October 31 as P77,000.

What is the correct inventory amount that should be shown in the October 31 statement of
financial position? P83,000

Solution: Inventory taken by physical count 77,000

Goods purchased in transit FOB shipping point excluded 6,000
Correct Inventory 83,000

7. Malayan, Inc.’s inventory is valued at P562,500 prior to any adjustments on the year ended
December 31, 2019. The following information has been found relating to certain inventory
transactions.

• Goods valued at P100,000 are on consignment with customer. These goods are not included
in the P562,500 inventory figure.

• Goods costing P27,000 were received from a vendor on January 5, 2020. The related invoice
was received and recorded on January 12, 2020.The goods were shipped on December 31,
2019, terms FOB shipping point.

• Goods costing P85,000 were shipped on December 31, 2019, and were delivered to the
customer on January 2, 2020. The terms of the sale were FOB shipping point. The goods were
included in ending inventory of 2019, even though the sale was recorded in 2019.
• A P35,000 shipment of goods to a customer on December 31, 2019, terms FOB destination
was not included in the year-end inventory. The goods cost P26,000 and were delivered to the
customer on January 8, 2020. The sale was properly recorded in 2020.

• An invoice for goods costing P35,000 was received and recorded as a purchase on December
31, 2019. The related goods, shipped FOB destination, were received on January 2, 2020, and
thus were not included in the physical inventory.

• Goods valued at P65,000 are on consignment from a vendor. These goods are not included in
the year-end inventory figure.

• A P60,000 shipment of goods to a customer on December 30, 2019, terms FOB destination,
was recorded as a sale in 2019. The goods, costing P37,000 and delivered to the customer on
January 6, 2020, were not included in 2019 ending inventory.

Determine the correct inventory amount to be reported on Malayan’s statement of Financial

Position at December 31, 2019. P667,500
San Beda College Alabang
College of Arts and Sciences
Accountancy Department
Leonald C. Tapia, CPA

Reported inventory 562,500

Adjustments:
Goods out on consignment 100,000
Goods purchased in transit FOB shipping point 27,000
Goods sold in transit FOB shipping point included in inventory (85,000)
Goods sold in transit FOB destination not included in inventory 26,000
Goods sold in transit FOB destination not included in inventory 37,000
Correct inventory 667,500

8. On December 31, 2019, Bee Inc showed a balance of P1,250,000 of its inventories which
includes:

• Goods held on consignment for P300,000 at selling price.

• Goods out on consignment on Dee Co, at cost of P700,000.
• Product A, a special order product by a customer, finished as of the same date, P100,000.
• Product B, a special order product by a customer, 75% completed as of the same date,
P30,000.

The following items are not yet included in the said balance:

• Goods purchased in transit, FOB Shipping point, P200,000.

• Goods sold in transit, FOB Destination, P350,000.
• Goods out on consignment on Gee Inc, at selling price of P607,500. The mark-up on sales on
the goods is 35%.

What is the Correct amount of Inventory? P1,794,875

Inventory Balance - Dec 31, 2019 1,250,000

Less: goods held on consignment 300,000
finished special order 100,000
Add: Goods purchased in transit, FOB Shipping point 200,000
Goods sold in transit, FOB Destination 350,000
Goods out on consignment (607,000 x 65%) 394,875
Correct inventory 1,794,875

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