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Mandaluyong Company is an importer and wholesaler that was audited for the year ending December 31, 2015. The auditor observed the physical inventory on November 30, 2015 and obtained various purchase and sales figures. The auditor discovered several items that needed adjustments including shipments received but not recorded until December, shipments received damaged and excluded from inventory, and deposits made for products received in January 2016. Using this information, the auditor was asked to calculate the gross profit rate for the first 11 months of 2015, cost of goods sold for December 2015 using gross profit method, and estimated inventory as of December 31, 2015 using gross profit method.

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1K views2 pages

This Study Resource Was

Mandaluyong Company is an importer and wholesaler that was audited for the year ending December 31, 2015. The auditor observed the physical inventory on November 30, 2015 and obtained various purchase and sales figures. The auditor discovered several items that needed adjustments including shipments received but not recorded until December, shipments received damaged and excluded from inventory, and deposits made for products received in January 2016. Using this information, the auditor was asked to calculate the gross profit rate for the first 11 months of 2015, cost of goods sold for December 2015 using gross profit method, and estimated inventory as of December 31, 2015 using gross profit method.

Uploaded by

Anna Taylor
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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PROBLEM NO.

Your client, Mandaluyong Company, is an importer and wholesaler. Its merchandise is purchased
from several suppliers and is warehoused until sold to customers.

In conducting your audit for the year ended December 31, 2015, you were satisfied that the
system of internal control was good. Accordingly, you observed the physical inventory at an
interim date, November 30, 2015 instead of at year end. You obtained the following information
from your client’s general ledger:

Inventory, January 1, 2015 P 1,312,500


Physical inventory, November 30, 2015 1,425,000
Sales for 11 months ended Nov. 30, 2015 12,600,000
Sales for the year ended Dec. 31, 2015 14,400,000
Purchases for 11 months ended Nov. 30, 10,125,000
2015 (before audit adjustments)
Purchases for the year ended Dec. 31,
2015 (before audit adjustments) 12,000,000

Your audit disclosed the following information:

a) Shipments received in November

m
and included in the physical inventory but
recorded as December purchases.
er as P 112,500

co
b) Shipments received in unsalable
eH w
condition and excluded from physical inventory.
o.
Credit memos had not been received nor
rs e

chargebacks to vendors been recorded:


ou urc

Total at November 30, 2015 15,000


Total at December 31, 2015
(including the November
o

unrecorded chargebacks) 22,500


c) Deposit made with vendor and charged
aC s
vi y re

to purchases in October, 2015.


Product was shipped in January,
2016. 30,000
d) Deposit made with vendor and charged
ed d

to purchases in November, 2015.


ar stu

Product was shipped FOB destination,


on November 29, 2015 and was included
in November 30, 2015 physical inventory
as goods in transit. 82,500
is

e) Through the carelessness of the receiving


Th

department shipment in early December 2015


was damaged by rain. This shipment was later
sold in the last week of December at cost. 150,000
sh

REQUIRED:

1. Gross profit rate for 11 months ended November 30,


2015.

2. Cost of goods sold during the month of December


2015 using the gross profit method.

3. December 31, 2015 inventory using the gross profit


method.

This study source was downloaded by 100000824353617 from CourseHero.com on 10-25-2021 06:11:27 GMT -05:00

https://www.coursehero.com/file/24121027/PROBLEM-NO-3docx/
SOLUTION GUIDE:
Requirement No. 1

Sales, up to 11/30 P 12,600,000


Less COS, up to 11/30:
Inventory, 1/1 P 1,312,500
Net purchases, 11/30 10,110,000
TGAS 11,422,500
Inventory, 11/30 ( 1,342,500)
Gross profit 10,080,000
P 2,520,000

Computation of adjusted amounts:

Inventory, 11/30 N.P.,11/30 (11 mos.) N.P.,12/31 (12 mos.)


Unadjusted 1,425,000 10,125,000 12,000,000
a - 112,500 -
b - (15,000) (22,500)
c - (30,000) (30,000)
d (82,500) (82,500) -
e -

m
Adjusted 1,342,500 10,110,000 11,947,500

er as
co
eH w
Requirement No. 2 o.
rs e
ou urc

Sales, up to 12/31 P14,400,000


Less sales, up to 11/30 12,600,000
Sales – December 1,800,000
o

Sales without profit (150,000)


Sales with profit 1,650,000
aC s
vi y re

x Cost ratio .8
COS with profit 1,320,000
COS without profit 150,000
Total P 1,470,000
ed d
ar stu

Requirement No. 3

Inventory, 1/1 P 1,312,500


is

Net purchases, 12/31 11,947,500


Th

TGAS 13,260,000
Less cost of sales:
With profit
[(14.4M -.15M)x.8] P11,400,000
sh

Without profit 150,000 11,550,000


Estimated inventory, 12/31 P 1,710,000

This study source was downloaded by 100000824353617 from CourseHero.com on 10-25-2021 06:11:27 GMT -05:00

https://www.coursehero.com/file/24121027/PROBLEM-NO-3docx/

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