PRACTCAL ACCOUNTNG PROBLEMS

NVENTORY
1. Loren Company reported P5, 000,000 of inventory on December 31, 2010, based on physical count.
Additional information is as follows:
O Exclude from physical count were goods billed to a customer, FOB shipping point, on December
31, 2010. The goods had a cost of P200, 000 and had been billed at P350, 000. The shipment is
ready for pick-up by the delivered contractor on January 5, 2011.
O Goods were in transit from a vendor. The invoice cost was P300, 000 and goods were shipped
FOB shipping point on December 31, 2010.
O Work in process costing P400, 000 was sent to an outside processor for finishing on December 31,
2010.
O Goods out on consignment with sales price of P1, 000, 000 and markup of 25% on cost. Shipping
costs amounted to P50, 000. What is the correct amount of inventory on December 31, 2010?
a. 6, 750,000
b. 6, 700,000
c. 6, 550,000
d. 6, 950,000
2. On June 1, 2010, Cherry Company sold merchandise with a list price of P5, 000, 000 to a customer. Cherry
allowed trade discount of 20% and 10%. Credit terms were 5/10, n/30 and the sale was made FOB shipping
point. Cherry prepared P100, 000 of delivery cost for the customer as an accommodation. On June 11,
2010, what is the full remittance from the customer?
a. 3, 600,000
b. 3, 420,000
c. 3, 700,000
d. 3, 520,000
3. On November 15, 2010, Barbara Company entered into a commitment to purchase 100, 000 barrels of
aviation fuel for P55 per barrel on March 31, 2011. The entity entered into this purchase commitment to
protect itself against the volatility in the aviation fuel market. By December 31, 2010, the purchase price of
aviation fuel had been fallen to P50 per barrel. However, by March 31, 2011, when the entity took delivery of
the 100, 000 barrels the price of aviation fuel had risen to P58 per barrel. How much should be recognizes
as gain on purchase commitment for 2011?
a. 500, 000
b. 300, 000
c. 800, 000
d. 0

4. The following information was derived from the accounting records of Myra Company for the current year:
Myra's warehouse Goods held by consignees
Beginning nventory 1, 100,000 120, 000
Purchases 4, 800,000 600, 000
Freight in 100, 000
Transportation to consignees 50, 000
Freight out 300, 000 80, 000
Ending inventory 1, 450,000 200, 000
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What is the cost of goods sold for the current year?
a. 4, 550,000
b. 4, 850,000
c. 5, 070,000
d. 5, 120,000
5. Hannah Company purchases motorcycles from various countries and exports them to Europe. Hannah
Company has incurred the following costs during the current year:
Cost of purchases based on vendors' invoices 5, 000,000
Trade discount on purchases already deducted from vendors' invoices 500,000
mport duties 400,000
Freight and insurance on purchases 1, 000,000
Other handling costs relating to imports 100,000
Brokerage commission paid to agents for arranging imports 200,000
Sales commission paid to sales agents 300,000
After-sales warranty costs 250,000
Salaries of accounting department 600,000
What is the total cost of the purchases?
a. 5, 700,000
b. 6, 100,000
c. 6, 700,000
d. 6, 500,000
6. On July 1, 2010, Claire Company recorded purchases of inventory of P3, 000,000 and P2, 000,000 under
credit terms of 2/15, net 39. The payment due on the P3, 000,000 purchases was remitted on July 16. The
payment due on the P2, 000,000 purchases was remitted on July 31. Under the net method and gross
method, these purchases should be included at what amount in the determination of cost of goods available
for sale?
Net Method Gross Method
a. 4, 900,000 4, 940,000
b. 4, 900,000 5, 000,000
c. 4, 940,000 4, 900,000
d. 5, 000,000 4, 900,000
7. Hazel Company's accounts payable on December 31, 2010 totaled P4, 500,000 before any necessary year-
end adjustments relating to the following transactions:
O On Dec, 31, 2010, Hazel, wrote and recorded checks creditors totaling P2,000,000 causing an
overdraft of P500,00 in hazel's bank account on Dec 31, 2010. The checks were mailed on January
15, 2011.
O On Dec 31, 2010, Hazel purchased and received goods for P75,000,000 terms, 2/10, n/30. Hazel
records purchases and accounts payable at net amount. The invoice was recorded and paid
January 10, 2011.
O Goods shipped F.O.B destination on December 31, 2010 from a vendor to Hazel were received
January 15, 2011, The invoice cost was P325,000.
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On December 31, 2010, what amount should Hazel report as accounts payable?
a. 7,575,000
b. 7,250,000
c. 7,235,000
d. 7,553,000

8. Evita Company's usual sales terms are net 60 days F.O.B shipping point. Sales, net of returns and
allowances, totaled P9, 200,000 for the year ended December 31, 2010, before year-end adjustments.
Additional data are as follows:
O On December 31, 2010, Evita authorized a customer to return, for full credit, goods
shipped and billed at P200,000 on December 15, 2010. The returned goods were received
by Evita on January15, 2011, and a P200,000 credit memo was issued and recorded on
the same date.
O Goods with an invoice amount of P300,000 were billed and recorded on January 15, 2011.
The goods were shipped on December 31, 2010.
O Goods with an invoice amount of P400,000 were billed and recorded on December 31,
2010. The goods were shipped on January 15, 2011.
What amount should be reported as net sales for 2010?
a. 9, 300,000
b. 9, 100,000
c. 9, 000,000
d. 8, 900,000

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