EXERCISE 2 The list of items that may or may not be reported as inventory in a company's December 31 financial position is presented below. Indicate which of these items would typically be reported as inventory in the financial statements. If an item is not reported as inventory, indicate how it should be reported in the financial statements.

1. Goods out on consignment at another company's store.

2. Goods sold on an installment basis (bad debts can be reasonably estimated).

3. Goods purchased f.o.b. shipping point that is in transit at December 31.

4. Goods purchased f.o.b. destination that is in transit at December 31.

5. Goods sold to another company, for which our company has signed an agreement to repurchase at a set price that covers all costs related to the inventory.

6. Goods sold where substantial returns are predictable.

7. Goods sold f.o.b. shipping point that is in transit at December 31.

8. Freight charges on goods purchased.

9. Interest costs incurred for inventories that are routinely manufactured.

10.Costs incurred to advertise goods held for resale.

11.Materials on hand not yet placed into production by a manufacturing firm.

12.Office supplies.

13.Raw materials on which a manufacturing firm has started production but which are not completely processed.

14.Factory supplies.

15.Goods held on consignment from another company.

16.Costs identified with units completed by a manufacturing firm but not yet sold.

17.Goods sold f.o.b. destination that is in transit at December 31.

18.Short-term investment is stocks and bonds that will. Be resold in the near future.

PROBLEM 7 Vangie Company, a merchandising concern entity, has the following transactions during 2020:

a. Purchased merchandise amounting to P 100,000. Terms: 2/10, n/30.

b. Sold merchandise to various customers, P 125,000. Cost of merchandise sold, P 65,000.

c. Approved and accepted the return of merchandise from customer due to wrong delivery, P 12,000. The cost of the inventory is P 8,000.

d. Paid freight for merchandise sold, P 12,000.

e. Returned merchandise to suppliers due to damages, P 15,000.

f. Acquired merchandise from various suppliers, P 180,000. Terms: less 10%, 2/10, n/30.

g. Paid accounts payable to various suppliers amounting to P 90,000 less 2% discount taken.

h. Sold merchandise to various customers, P 90,000. Cost of merchandise sold, P 55,000.

i. Received proceeds from accounts receivable collection amounted to P 100,000, net of 2% discounts.

j. Paid freight for merchandise purchased, P 18,000.

Requirements: 1. Record the above transactions using a. Periodic Inventory System b. Perpetual Inventory System

PROBLEM 8

The following accounts were included in the unadjusted trial balance of Editah Company as of December 31, 2019: Cash 963,200 Accounts receivable 2,254,000 Inventory 6,050,000 Accounts payable 4,201,000 Accrued expenses 431,000 College of Accounting Education 3F, Business & Engineering Building Matina, Davao City Phone No.: (082)300-5456 Local 137 - 199 - During your audit, you noted that Editah Company held its cash books open after year-end. In addition, your audit revealed the following: 1. Receipts for January 2020 of P654,600 were recorded in the December 2019 cash receipts book. The receipts of P360,100 represent cash sales, and P294,500 represent collections from customers, net of 5% cash discounts. 2. Accounts payable of P372,400 was paid in January 2020. The payments, on which discounts of P12,400 were taken, were included in the December 2019 check register. 3. Merchandise inventory is valued at P6,050,000 before any adjustments. The following information has been found relating to certain inventory transactions: a. The invoice for goods costing P175,000 was received and recorded as a purchase on December 31, 2019. The related goods shipped FOB destination was received on January 4, 2020, and thus were not included in the physical inventory. b. A P182,000 shipment of goods to a customer on December 30, 2019, terms FOB destination, are not included in the year-end inventory. The goods cost P130,000 and were delivered to the customer on January 3, 2020. The sale was recorded correctly in 2020. c. Goods costing P637,500 were shipped on December 31, 2019, and were delivered to the customer on January 3, 2020. The terms of the invoice were FOB shipping point. The goods were included in 2019 ending inventory, even though the sale was recorded in 2019. d. Goods costing P217,500 were received from a vendor on January 4, 2020. The related invoice was received and recorded on January 6, 2020. The goods were shipped on December 31, 2019, terms FOB shipping point. e. Goods valued at P275,000 are on consignment with a customer. These goods are not included in the physical inventory. f. Goods valued at P612,500 are on consignment from a vendor. These goods are not included in the physical inventory. Requirements: Based on the above transactions, determine the adjusted balance of the following account as of December 31, 2019: 1. Cash 2. Accounts Receivable 3. Inventory 4. Accounts Payable

PROBLEM 9

Angel Company provided the following data for June 30: June 1 Balance 5,000 units @ P20.00 each June 3 Sale 3,000 units @ P35.00 each June 10 Purchases 6,000 units @ P21.50 each June 13 Purchases 3,000 units @ P20.50 each College of Accounting Education 3F, Business & Engineering Building Matina, Davao City Phone No.: (082)300-5456 Local 137 - 200 - June 20 Sales 1,500 units @ P35.00 each June 25 Purchases 2,000 units @ P22.00 each June 28 Sales 5,500 units @ P35.00 each June 30 Sales 2,500 units @ P35.00 each Requirements: Compute the inventory cost at the end of June based on the following cost-flow assumptions: 1. Specific Identification. Assume that the inventory left at the end of the month came from the June 10 purchases. 2. FIFO - Periodic 3. FIFO - Perpetual 4. Weighted Average 5. Moving Average - Perpetual

PROBLEM 10

The inventory of Juan Company on December 31, 2020, consists of the following items: Inventory No. Quantity Cost per Unit NRV A1001* 1,000 P56 P 6 A1005 4,100 61 59 A1010 500 98 85 A1014 1,200 15 16 A1021 3,250 35 37 A1022 750 20 26 A1030 1,350 39 35 *Inventory A1001 is slow-moving and was acquired four years ago. It will be sold as scrap with a realizable value of P6.00 Requirement: 1. Determine the valuation of the inventory as of December 31, 2020.

Problem 11

The following information is for Mikaela Enterprises Ltd: Jan. 31 Feb. 28 Mar. 31 Apr. 30 Inventory at cost P25,000 P25,100 P29,000 P23,000 Inventory at LCNRV 24,500 17,600 22,600 17,300 Purchases for the month 20,000 24,000 26,500 Sales for the month 29,000 35,000 40,000 Requirements: 1. Using the above information, give a monthly income statement for the month of February, March, and April. Mikaela Enterprises Ltd. uses the indirect or allowance method. 2. Prepare the journal entry that is needed to establish the valuation account on January 31. Also, prepare the journal entries to adjust it at the end of each month after that.

PROBLEM 12

During 2020, Eddie Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to the company for a lump sum of P59,850 because it is discontinuing manufacturing operations and wishes to dispose of its entire stock. Three types of chairs are included in the carload. The three types and the estimated selling price for each are listed below: Type No. of Chairs Est. Selling Price Each Lounge Chairs 400 P90 Armchairs 300 80 Straight Chairs 700 50 During 2020, Eddie sells 200 lounge chairs, 100 armchairs, and 120 straight chars. Requirement: 1. What is the amount of gross profit realized in 2020? 2. What is the amount of inventory of unsold straight chairs on December 31, 2020?

PROBLEM 13

Juan Gabriel Company manufactures bath towels. The production comprises 70% of Class A, and 30% of Class B. Class A sells for P300 per dozen while Class B sells for P200 a dozen. During the current year, 50,000 dozens were produced at an average cost of P175 a dozen. The inventory at the end of the current year is as follows: 3,000 dozens Class A at P175 P 525,000 4,500 dozens Class B at P175 787,500 Total Inventory P 1,312,500 Using the relative sales value method, which management considers as a more equitable basis for cost distribution, compute 1. the inventory's (cost) of the inventory? Hint: First, find the ratio using the relative sales value method, then allocate this to the total production cost of P8,750,000 [50,000 dozens at P175]. After that, divide it into the number of units of production per class to get the unit cost.

PROBLEM 14

Mimi Company has been having difficulty obtaining necessary raw materials for its manufacturing process. The company, therefore, signed a long-term noncancelable purchase commitment with its largest supplier of this raw material on Jun3 30, 2020, at an agreed price of P800,000. On December 31, 2020, the raw material had declined in price to P720,000. Requirement: 1. What entry would you make on December 31, 2020, to recognize these facts? 2. Assuming that on March 31, 2021, Mimi Company purchases the raw materials. During this time, the market price of the raw materials is P810,000? P780,000? P690,000?