Problem: King's beginning inventory was P350,000, purchases were !ith ith a nor"a nor"all gro gross ss "arg "argin in rate rate o# o# 35$ 35$,, h how ow "uch "uch is end Solution:
4.
Kings
&eginning nventory Purchases (oods )vailable #or sale *ess+ ost o# -ales et -ales /ultiply by ost ratio nding nventory
P P P
,400,000.00 65$ P
Problem: (len etail etail -tore -tore has a beginning beginning inventory inventory o# P00,000 P00,000 a -ale -ales s wer were e ,0 ,000 00,0 ,000 00,, 2ow 2ow "uch "uch is endin ending g inve invento ntory ry at c Solution:
3. Gien Retail Store &eginning nventory P Purchases (oods )vailable #or sale P *ess+ ost o# -ales 1,400,000,500,000 1,400,000,500,00056$ 56$ et -ales P ,000,000.00 /ultiply by ost ratio 56$ nding nventory P
Problem: )"sterda" )"sterda" 2ospita 2ospitall supply supply orporation orporation reported reported using using th a"ount was P490.5 "illion. e:uired+
a. -upposed that during the period covered by this
that understated its inventory by P15"illion, !hat sold and gross "argin o# the period% 8n cost o# go 8n total gross "argin or both periods co"bined% b. !hen a"sterda" 2ospital -upply reported the !ould 778 or *78 have shown a higher gross "ar
Solution: 2. Amsterdam Hospital Supply Corporation
a.)
ost o# (oods -old (ross /argin
urrent Period 8verstated 15"
b.) t "argin. 2owever under the *78 "ethod approach during i result to lower net inco"e because the inventory is a higher cost o# goods sold which is e=pressed at r pro>t "argin.
Probem: 8ctagon @ata o"puter orporation reported a net loss # co"pany noted+ &alance -heet+ urrent )ssets+ nventories ote 1c and AAAAAAAAAAAAAA ote 1+ nventories are stated at the lower o# cost or "a
>rstDout 778 basis. ote + @ecliningA.."arCet conditions during the >scal ye sales o# the o"pany's older printing productsE )ccordingl includes a debit o# 9,600,000. e:uired+ a. )t which a"ount did 8ctagon report its inventory, cost b. # the reported inventory o# P4B,051,000 represents "a
Solution: #. $%tagon &ata nComputer Corporation a.) 8ctagon reported its inventory at "arCet value, be result to the lowest inco"e or possible loss, and be used the "arCet value approach in valuing inventor b.)
P1,460,000.00 and sales totasled to P,400,000 ng inventory%
350,000.00 1,460,000.00 1,B10,000.00
1,560,000.00 50,000.00
ost ratio+ 100$D35$65$
cost and P400,000 at retail, Purchases were 1,00,000 at cost a st and at retail%
Cost
Retail
00,000.00 P 1,00,000.00 1,400,000.00 P
400,000.00 ,100,000.00 ,500,000.00
1,10,000.00 B0,000.00 P
,000,000.00 500,000.00
*78 inventory "ethod. ts inventory
report, the co"pany "ade an error
e;ect would this error have on cost o# goods ds sold and gross "argin o# the #oll.period% bove a"ount #or inventory, prices were rising. in% !hy%
!
!
7ollowing Period
C
" Period o"bined D ounter balancing on Gotal (ross /argin, o e;ect
rising prices 778 "ethod would result tory is e=pressed in ter"s o# recent or new h is e=pressed at old prices thus giving a
?ation or rising prices *78 "ethod would e=pressed in ter"s o# old prices thus giving cent or new prices thust resulting to a lower
r the year. n its >nancial state"ents, the
A.P4B,051,000.00 Cet. ost is deter"ined on a >rstDin,
ar adversely a;ected anticipated y, the state"ent o# lossA..
r "arCet value% 2ow can you tell% Cet value, what was the cost o# inventory%
ause at declining stage, 778 "ethod would ause itFs a period o# in?ation, when the co"pany it would clearly resulted to net loss.
d ,100,000 at retail
