Question
October Inc., a manufacturing company, had the following information about its inventories as of December 31, 2020: Finished Goods Inventory: Item Cost Selling Price Cost
October Inc., a manufacturing company, had the following information about its inventories as of
December 31, 2020:
Finished Goods Inventory:
Item Cost Selling Price Cost to Sell
A P500,000 P1,000,000 20% of Sales Price
B 1,200,000 1,500,000 30% of Sales Price
C 800,000 1,200,000 10% of Sales Price
Work-in-process Inventory:
Item Direct
Materials
Direct Labor Overhead Cost to
Complete
Selling
Price upon
Completion
A P30,000 P50,000 P25,000 P50,000 P200,000
B 45,000 65,000 40,000 60,000 250,000
C 75,000 25,000 80,000 40,000 240,000
Raw Materials Inventory: Finished Goods A:
Item Cost Replacement
cost
RM A-01 P120,000 P125,000
RM A-02 95,000 90,000
Raw Materials Inventory: Finished Goods B:
Item Cost Replacement
cost
RM B-01 P80,000 P100,000
RM B-02 105,000 98,000
RM B-03 110,000 100,000
Raw Materials Inventory: Finished Goods C:
Item Cost Replacement
cost
RM C-01 P175,000 P170,000
RM C-02 40,000 45,000
Required:
1. What is the correct carrying value of finished goods inventory?
2. What is the correct carrying value of work-in process inventories?
3. What is the correct carrying value of raw-materials inventories?
4. Assuming direct write-off method is used to account for inventory write-down, how much should
be recognized in the profit/loss as a result of the lower of cost or net realizable value valuation
of inventories?
5. Assuming allowance method and the following allowance for inventory write-down existed at the
beginning of the year (FG - P60,000; WIP - P70,000; RM - 0), how much should be recognized
in the profit/loss as a result of the lower of cost or net realizable value valuation of inventories?
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