Please answer

23. Which of the following is not affected by the inventory

valuation method used by an entity?

a. Cost of goods sold.

b. Net income of the entity.

c. Amounts owed for income taxes.

d. Amounts paid to acquire merchandise.

24. Which statement is correct regarding net realizable

value (NRV)?

a. NRV refers to the net amount that an entity

expects to realize from the sale of inventory in the

ordinary course of business.

b. NRV for inventories may not equal fair value less

costs to sell.

c. Both a and b.

d. Neither a nor b.

25. The cost of inventories may not be recoverable if

I. The inventories are damaged

II. The inventories have become wholly or partially

obsolete

III. The selling prices have declined

IV. The estimated costs of completion or the estimated

costs to be incurred to make the sale have

increased.

a. I, II, III and IV c. I and II only

b. I, II and III only d. I, II and IV only

26. The closing inventory at cost of a company amounted

to P284,700. The following items were included at

cost in the total:

400 coats, which had cost P80 each and normally

sold for P150 each. Owing to a defect in

manufacture, they were all sold after the reporting

date at 50% of their normal price. Selling

expenses amounted to 5% of the proceeds.

800 skirts, which had cost P20 each. These too

were found to be defective. Remedial work costs

P5 per skirt and selling expenses for the batch

totaled P800. They were sold for P28 each.

What should the inventory value be according to PAS 2

Inventories after considering the above items?

a. P281,200 c. P282,800

b. P282,100 d. P329,200

27. The following figures relate to inventory held at

December 31:

Per Unit

Cost P10

General selling price 12

Selling price in a binding contract to sell 14

Quoted price in an active market for

similar asset 11

Estimated costs to sell 3

There were 10,000 units (including 2,000 held to satisfy

a binding contract to sell).

At what amount should the entity report the inventory

on its statement of financial position?

a. P100,000 c. P90,000

b. P 92,000 d. P84,000

28. Which is correct regarding write-down of inventory to

net realizable value?

a. Materials and other supplies held for use in the

production of inventories are not written down

below cost if the finished products in which they

will be incorporated are expected to be sold at or

above cost.

b. When a decline in the price of materials indicates

that the cost of the finished products exceeds net

realizable value, the materials are written down to

net realizable value. In such circumstances, the

best available measure of the net realizable value

of materials is the replacement cost.

c. Both a and b.

d. Neither a nor b.

29. The following figures relate to inventory of materials

held at December 31:

Item X Item Y

Cost P200,000 P400,000

Replacement cost 180,000 370,000

Estimated costs to convert

materials into finished goods

100,000

200,000

Estimated selling price of

finished goods

320,000 610,000

Estimated costs to sell 10,000 15,000

The entity should recognize loss on write-down of

inventory of materials of

a. P50,000 c. P5,000

b. P30,000 d. Nil

30. The Refenjol Corporation included the following in its

unadjusted trial balance as of December 31:

Inventory, 1/1 P 19,450,000

Purchases 127,850,000

Available for sale P147,300,000

The inventory at December 31 was counted at a cost

of P14.5 million. This includes P500,000 of slow

moving inventory that is expected to be sold for a net

amount of P300,000.

The cost of sales for the year is

a. P133,100,000 c. P132,800,000

b. P133,000,000 d. P132,600,000

31. In accordance with PAS 2, an entity should disclose

a. The amount of any write-down of inventories

recognized as an expense in the period.

b. The amount of any reversal of any write-down that

is recognized as a reduction in the amount of

inventories recognized as expense in the period.

c. The circumstances or events that led to the

reversal of a write-down of inventories.

d. All of these.

32. In accordance with PIC Q&A No. 2018-10 PAS 2 -

Scope of disclosure of inventory write-downs, an entity

should disclose

a. Write-downs of inventory held at the end of the

reporting period.

b. Write-downs representing sales below cost during

the reporting period.

c. Both a and b.

d. Neither a nor b.

33. Which statement is incorrect regarding reversal of

inventory write-down to net realizable value?

a. If the selling price of inventory that has been

written down to net realizable value in a prior

period, subsequently recovers, the previous

amount of the write-down can be reversed.

b. The reversal is limited to the amount of the

original write-down.

c. The amount of any reversal of any write-down of

inventories, arising from an increase in net

realizable value, shall be recognized as a reduction

in the amount of inventories recognized as an

expense in the period in which the reversal occurs.

d. None, all the statements are correct.

36. Buyer Co. regularly buys shirts from Vendor Company

and is allowed trade discounts of 20% and 10% from

the list price. Buyer purchased shirts from Vendor on

May 27 and received an invoice with a list price of

P100,000 and payment terms 2/10, n/30. If Buyer

uses the net method of recording purchases, the

journal entry to record the payment on June 8 will

include

a. A debit to Accounts payable of P72,000.

b. A debit to Purchase Discounts Lost of P1,440.

c. A credit to Purchase Discounts of P1,440.

d. A credit to Cash of P70,560.

37. Catapult Corp. purchased merchandise during the year

on credit for P200,000; terms 2/10, n/30. All of the

gross liability except P40,000 was paid within the

discount period. The remainder was paid within the

30-day term. At the end of the annual accounting

period, 90% of the merchandise had been sold and

10% remained in inventory. The entity has no

beginning inventory. The entity uses net method of

recording purchases.

If the entity used the gross method of recording

purchases instead of the net method, the reported cost

of goods sold would have been

a. The same c. Lower by P720

b. Higher by P720 d. P176,400

Use the following information for the next two questions.

On November 15, 2019, Socrates entered in to a

commitment to purchase 200,000 units of raw material X

for P40 per unit on March 15, 2020. Socrates entered into

this purchase commitment to protect itself against the

volatility in the price of raw material X. By December 31,

2019, the purchase price of material X had fallen to P35

per unit.

38. How much will be recognized as loss on purchase

commitment on March 15, 2020 if the price of the

material had fallen further to P32 per unit?

a. P1,600,000 c. P600,000

b. P1,000,000 d. P 0

39. How much will be recognized as gain on purchase

commitment on March 15, 2020 if the price of the

material had risen to P42 per unit?

a. P2,000,000 c. P400,000

b. P1,000,000 d. P 0

40. On January 1, 2020, Pastille Corp. signed a three-year

noncancelable purchase contract, which allows Pastille

to purchase up to 500,000 units of a computer part

annually from Pyramid Supply Co. at P10 per unit and

guarantees a minimum annual purchase of 100,000

units. During 2020, the part unexpectedly became

obsolete. Pastille had 250,000 units of this inventory

at December 31, 2020, and believes these parts can

be sold as scrap for P2 per unit. What amount of

probable loss from the purchase commitment should

Pastille report in its 2020 profit or loss?

a. P2,400,000 c. P1,600,000

b. P2,000,000 d. P 800,000

41. Which is not a required disclosure for inventories in

accordance with PAS 2?

a. The accounting policies adopted in measuring

inventories.

b. The carrying amount of inventories carried at fair

value less costs to sell

c. The amount of inventories recognized as an

expense during the period

d. The fair value of inventories

42. Which is not a required disclosure for inventories in

accordance with PAS 2?

a. Inventory costing methods employed.

b. Inventory composition.

c. Inventory financing arrangements.

d. Inventory location.