Intermediate Accounting (Midterms)

Use the following information for the next

two questions: a. 25,080,000 b. 25,080,000 c. 20,880,000
ABC Co. purchased goods with invoice d. 20,800,000
price of ₱3,000 on account on December
27, 20x1. The related shipping costs Consigned goods
amounted to ₱50. The seller shipped the 4. ABC Co. consigned goods costing
goods on December 31, 20x1. ABC Co. ₱14,000 to XYZ, Inc. Transportation costs of
received the goods on January 2, 20x2 and delivering the goods to XYZ totaled ₱3,000.
settled the account on January 5, 20x2. Repair costs for goods damaged
during transportation totaled ₱1,500. To
1. How much is the capitalizable cost of the induce XYZ, Inc. in accepting the
inventory purchased if the terms of consigned goods, ABC Co. gave XYZ
the shipment is FOB shipping point, freight ₱2,000 representing an advance
prepaid? commission. How much is the cost of the
a. 3,050 b. 3,000 c. 2,950 d. 0 consigned goods?
a. 20,500 b. 18,500 c. 17,000 d. 14,000
2. How much is the net cash payment to the
supplier if the terms of the Correct inventory and accounts payable
shipment are FOB destination, freight Use the following information for the next
collect? two questions:
a. 3,050 b. 3,000 c. 2,950 d. 0 On December 31, 20x1, ABC Co. has a
balance of ₱240,000 in its inventory
3. ABC Co. provided you the following account determined through physical count
information for the purpose of and a balance of ₱90,000 in its
determining the amount of its inventory as accounts payable account. The balances
of December 31, 20x1: were determined before any necessary
Goods located at the warehouse (physical adjustment for the following:
count) 3,400,000
Goods located at the sales department (at a. Segregated goods in the shipping area
cost) 15,800,000 marked “Bill and hold sale” were
Goods in-transit purchased FOB Destination included in inventory because shipment was
2,400,000 not made until January 4, 20x2. The goods
Goods in-transit purchased FOB Shipping were sold to the customer on a “bill and
Point 1,600,000 hold” sale for ₱20,000. The cost of the
Freight incurred under “freight prepaid” for goods is ₱10,000. The goods were already
the goods packed and ready for shipment. Both ABC
purchased under FOB Shipping Point and the buyer acknowledged the shipping
80,000 term.
Goods held on consignment from XYZ, Inc.
1,800,000 b. A package containing a product costing
How much is the total inventory on ₱80,000 was standing in the shipping
December 31, 20x1?
Intermediate Accounting (Midterms)
area when the physical inventory was related to the inventory. 280,000
conducted. This was included in the c. Goods sold where large returns are
inventory although it was marked “Hold for unpredictable. 70,000
shipping instructions.” The sale d. Goods received from Beta Co. for which
order was dated December 17 but the an agreement was
package was shipped and the customer signed requiring ABC Co. to replace such
was billed on January 4, 20x2. goods in the near
c. Merchandise costing ₱10,000, shipped future. 50,000
FOB destination from a vendor on
December 30, 20x1, was received and How much is included as part of inventory?
recorded on January 5, 20x2. a. 50,000 b. 120,000 c. 270,000 d. 330,000
d. Goods shipped F.O.B. shipping point on
December 27, 20x1, from a vendor to
ABC Co. were received on January 6, 20x2.
The invoice cost of ₱30,000 was
recorded on December 31, 20x1 and
included in the count as “goods in-
transit.”

5. How much is the adjusted balance of

inventory?
a. 240,000 b. 230,000 c. 160,000 d. 8. How much are the ending inventory and
200,000 cost of goods sold under the FIFO –
periodic cost flow formula?
6. How much is the adjusted balance of Ending inventory Cost of goods sold
accounts payable? a. 219,840​ ​ 122,368
a. 90,000 b. 80,000 c. 60,000 d. 100,000 b. 112,341​ ​ 229,867
c. 122,368​ ​ 219,840
Inventories under financing agreement, d. 122,386​ ​ 219,804
Installment sales 9. How much are the ending inventory and
7. The records of ABC Co. show the cost of goods sold under the FIFO –
following: perpetual cost flow formula?
Ending inventory Cost of goods sold
a. Goods sold on an installment basis to a. 219,840​ ​ 122,368
XYZ, Inc., title to the b. 112,341​ ​ 229,867
goods are retained by ABC Co. until full c. 122,368​ ​ 219,840
payment is made. XYZ, d. 122,386​ ​ 219,804
Inc. took possession of the goods. 150,000 10. How much are the ending inventory and
b. Goods sold to Alpha Co., for which ABC cost of goods sold under the
Co. has the option to weighted average – periodic cost flow
repurchase the goods sold at a set price formula?
that covers all costs Ending inventory Cost of goods sold
Intermediate Accounting (Midterms)
a. 229,840​ ​ 112,160
b. 126,468​ ​ 215,740 Twenty percent of the inventory contained in
c. 120,080 ​ ​ 222,128 the warehouse has been salvaged
d. 120,072​ ​ 222,153 from the fire while half is partially damaged
and can be sold as scrap at thirty
11. How much are the ending inventory and percent of its cost. How much is the
cost of goods sold under the inventory loss due to the fire?
weighted average – perpetual cost flow a. 18,000 b. 5,400 c. 9,000 d. 11,700
formula?
Ending inventory Cost of goods sold 14. Based on the following information, how
a. 121,813​ ​ 220,395 much is the cost of goods sold?
b. 122,468​ ​ 219,740 Decrease in inventory 12,000
c. 122,017​ ​ 220,191 Increase in accounts payable 16,000
d. 123,384​ ​ 218,824 Payments to suppliers 80,000
a. 108,000 b. 96,000 c. 76,000 d. 84,000
12. On January 1, 20x1, ABC Co. signed a
three year, noncancelable purchase Use the following information for the next
contract, which allows ABC Co. to purchase two questions:
up to 12,000 units of a microchip Presented below is information pertaining to
annually from XYZ Co. at ₱15 per unit and ABC Co.:
guarantees a minimum annual Cost​ ​ Retail
purchase of 3,000 units. At year-end, it was Inventory, January 1 21,750 ​ 35,000
found out that the goods are Purchases​ 138,250​ 200,750
obsolete. ABC Co. had 4,000 units of this Freight-In ​ ​ 5,000 -
inventory at December 31, 20x1, and Purchase discounts ​ 1,250 -
believes these parts can be sold as scrap Purchase returns ​ 13,000 ​ 21,500
for ₱5 per unit. How is the loss on Departmental
purchase commitment to be recognized on Transfers-In (Debit)​ 2,500 ​​ 3,750
December 31, 20x1? Departmental
a. 70,000 b. 100,000 c. 60,000 d. 0 Transfers-Out (Credit)​ 2,000 ​​ 3,000
Markups ​ ​ ​ ​ 15,000
13. On October 1, 20x1, the warehouse of Markup cancellations ​​ ​ 5,000
ABC Co. and all inventories contained Markdowns ​ ​ ​ ​ 30,000
therein were razed by fire. Off-site backup Markdown cancellations​ ​ 7,500
of database shows the following Abnormal spoilage
information: (theft and casualty
Inventory, Jan. 1 20,000 loss) ​ ​ ​ 12,500​ 17,500
Net purchases 190,000 Sales ​ ​ ​ ​ 109,500
Net sales from Jan. to Sept. 240,000 Sales returns ​ ​ ​ ​ 6,250
Gross profit rate based on cost 25% Sales discounts​ ​ ​ 2,500
Employee discounts​ ​ ​ 1,250
Normal spoilage
Intermediate Accounting (Midterms)
(shrinkage and breakages)​ ​ 500 a. minor tools and spare parts
b. buildings being sold by a “buy and sell”
15. How much is the ending inventory using real estate entity
the Average cost method? c. obsolete inventory
a. 60,750 b. 60,000 c. 61,050 d. 62,400 d. assets held for use in the production or
supply of goods or services
16. How much is the ending inventory using
the FIFO cost method? 20. The measurement provisions of PAS 2
a. 60,750 b. 60,000 c. 61,050 d. 62,400 Inventories do not apply to which of the
following?
17. According to PAS 2, the primary issue in I. Inventories of producers of agricultural,
accounting for inventories is the forest, and mineral products to
determination of the extent that they are measured at net
I. cost to be recognized as an asset in the realizable value in accordance
statement of financial position. with well-established practices in those
II. the amount recognized as expense in the industries.
statement of profit or loss and II. Inventories of commodity broker-traders
other comprehensive income when the measured at fair value less costs
related revenues are recognized. to sell.
III. obsolete items that need to be written III. Inventories of a retail store.
down to net realizable value. IV. Inventories of a service concessionaire.
IV. the point of sale where ownership is a. I, II b. I, II, III c. III, IV d. I, II, III, IV
transferred from the seller to the
buyer 21. PAS 2 Inventories may not be applied to
a. I and II b. I, II, III c. I, II, IV d. I, II, III, IV which of the following,?
a. inventories consisting of agricultural,
18. In which of the following shall PAS 2 mineral and forest products
Inventories be applied? b. minor spare parts, tools and lubricants
a. Buildings constructed and to be sold to c. commodities of broker traders measured
third parties in the ordinary at fair value less costs to sell
course of business under specifically d. unfinished products undergoing
negotiated construction contracts. processing
b. Shares of stocks held for trading
c. Animals and plants that are managed and 22. Inventories of commodity broker-traders
to be sold in the ordinary course are measured at
of business a. fair value
d. Inventory of a service provider consisting c. net realizable value
only of direct labor and b. Cost
Overhead d. Fair value less costs to sell
Recognition
19. PAS 2 Inventories shall not be applied to
which of the following?
Intermediate Accounting (Midterms)
23. Which of the following is correct follow the transfer of physical possession of
regarding the recognition of inventories? the goods.
a. Inventories are recognized only when c. Ownership over inventories may be
legal title is obtained transferred to the buyer even when
b. Inventories are recognized only when legal title to the goods is retained by the
they meet the definition of seller.
inventory and they qualify for recognition as d. Transfer of ownership over inventories
assets. may coincide with or follow but
c. Inventories include only those that are never precedes the transfer of physical
readily available for sale in the possession of the goods.
ordinary course of business.
d. Inventories are recognized only by 27. When accounting for inventories,
entities engaged in trading or a. the form of the sales contract is more
manufacturing operations. important than its substance
b. the agreement between the seller and the
24. Inventories are assets (choose the buyer shall be considered in
incorrect one) determining the timing of transfer of
a. Held for sale in the ordinary course of ownership over the goods
business. c. the sales contract is ignored since
b. In the process of production for sale. ownership over inventories are
c. In the form of materials or supplies to be transferred only upon receipt of delivery by
consumed in the production the buyer
process or in the rendering of services. d. a journal entry is made only upon receipt
d. Held for use in the production or supply of of the delivery by the purchaser
goods or services.
28. Ownership over inventories is normally
25. Ownership over inventories is normally transferred from the seller to the
transferred to the buyer buyer
a. when legal title to the inventories is I. When the significant risks and rewards of
transferred ownership are transferred to
b. when the purchase price is fully paid the buyer
c. upon shipment of the goods by the seller II. The seller retains continuing managerial
to the buyer involvement to the degree
d. upon filling-up the sales order usually associated with neither ownership
nor effective control over the
26. Which of the following is incorrect goods sold
regarding the accounting for inventories? III. The seller retains neither continuing
a. Legal title over inventories normally managerial involvement to the
passes when possession over of the degree usually associated with ownership
goods are transferred. nor effective control over the
b. Transfer of ownership over inventories goods sold
may precede, coincide with, or a. I, II b. II, III c. I, III d. I, II, III
Intermediate Accounting (Midterms)