Financial Accounting and Reporting
Quiz 5
Instructions: Choose the letter of your answer to the following questions. Select the corresponding
letter to your answer sheet found in the Google Forms attached.
1. Which of the following is correct about inventories?
a. Inventories include goods in process
b. Inventories include raw materials that are used in the production process
c. Inventories include finished goods
d. All of the above
2. Under this inventory system, a physical count is necessary before profit is determined
a. Periodic inventory system
b. Perpetual inventory system
c. SME inventory system
d. Under no such system
3. Which inventory cost flow method is appropriate to use if the inventory items are not
interchangeable?
a. Specific identification method
b. FIFO method
c. Average method
d. LIFO method
4. GI SUMHAN NA SA A Co. buys and sells antiques. Each product is unique. If the entity adopts IAS
2 Inventories, the company
a. Is required to use specific identification method
b. Is required to use FIFO method
c. Is required to use average method
d. Has the option of using either FIFO or specific identification
5. According IAS 2 Inventories, inventories shall be subsequently measured at
a. Cost
b. Net realizable value
c. Lower of cost and net realizable value
d. Higher of cost and net realizable value
6. If gross profit rate is based on sales then
a. Net sales is sales is more than 100%
b. Cost of more than 100%
c. Cost is less than 100%
d. Net sales is less than 100%
Use the following information for question number 7
Kim Company counted and reported the ending inventory on December 31, 2021 at P2,800,000.
The following items were not yet included when the total amount of the ending inventory was
computed:
Goods located in the entity’s warehouse that are on consignment from
another entity P285,000
Goods sold by the entity and shipped FOB destination was in transit on
December 31, 2021 and received by the customer on January 2, 2022 310,000
Goods purchased by the entity and shipped FOB seller were in transit
on Dec. 31, 2021 and receive by the entity on January 2, 2022 440,000
Goods sold by the entity and shipped FOB shipping point were in transit
on Dec. 31, 2021 and received by the customer on January 2, 2022 550,000
7. What is the correct amount of inventory on December 31, 2021?
a. 2,810,000 c. 3,550,000
b. 3,535,000 d. 3,800,000
Use the following information for questions number 8-11
On January 1, 2021, Urbano Company was established to manufacture a single product.
The company’s production and sales records for 2021-2023 are made available below:
Production Sales
Units Cost Units Sales Revenue
2021 300,000 P1,350,000 195,000 1,823,250
2022 325,000 1,690,000 295,000 2,330,500
2023 290,000 1,653,000 245,000 2,082,500
All units produced in a year are assigned the same average cost.
8. Compute for the inventory beginning for 2023 using FIFO cost flow.
a. 710,000 c. 708,000
b. 716,000 d. 702,000
9. Compute for inventory ending for 2023 using FIFO cost flow.
a. 810,000 c. 1,026,000
b. 936,000 d. 1,040,000
10. Compute for the cost of goods sold in 2023 using FIFO cost flow.
a. 1,040,000 c. 1,329,000
b. 1,110,470 d. 1,400,000
11. Compute for the gross profit for 2023 using FIFO cost flow.
a. 1,042,500 c. 753,500
b. 972,030 d. 681,900
12. The cost of sales for Uriel Electronics in 2021 was P350,000. The beginning inventory is P50,000
more than the ending inventory, with the latter equivalent to 20% of the current year’s
purchases.
What was the value of the inventory account at the start of the year?
a. 90,000 c. 110,000
b. 100,000 d. 115,000
13. On December 28, 2021, Ellery Manufacturing Co. purchased goods costing 90,000. The terms
were FOB destination. Some of the costs incurred in connection with the purchase and delivery
of the goods were as follows: Packaging for shipment 1,000; shipping 1,500; special handling
charges 2,000. These goods were received on December 31, 2021.
In Ellery’s December 31, 2021 balance sheet, what amount of cost for these goods should be
included in inventory?
a. 91,000 c. 94,500
b. 91,500 d. 90,000
14. The Jag Corporation applies the lower of cost or net realizable value (NRV) inventory. Data
regarding the items in work-in-process inventory are shown below:
Shorts Pants
Historical cost P56,640 P90,000
Selling price 108,800 110,000
Estimated cost to complete 14,400 20,400
Replacement cost 50,400 95,400
Normal profit margin as percentage of selling price 25% 10%
The work-in-process inventory shall be reported at what amount?
a. 146,240 c. 184,000
b. 146,640 d. 184,400
15. Boom-Boom Company had the following inventory at year-end:
Cost NRV
Boxing gloves P2,700,000 P3,700,000
Boxing shoes 1,800,000 1,500,000
Wrist band 500,000 660,000
Boxing apparel 870,000 920,000
What amount should be reported as inventory at year-end?
a. 5,070,000 c. 4,700,000
b. 7,080,000 d. 5,570,000
Use the following information for questions number 16-20
On November 25, 2021, Ang Para Sa Imo Company entered into a non-cancellable commitment
to purchase 10,000 units of product X on February 15, 2022 at a price of P310 per unit.
On December 31, 2021, the market price of product X is P270 per unit. On February 15, 2022,
the market price of product X is P320 per unit.
16. What is the loss on purchase commitment to be recognized on December 31, 2021?
a. 0 c. 300,000
b. 100,000 d. 400,000
17. What is the gain on purchase commitment to be recognized on February 15, 2022?
a. 0 c. 400,000
b. 100,000 d. 500,000
18. What amount should be debited to purchases on February 15, 2022?
a. 2,700,000 c. 3,100,000
b. 3,000,000 d. 3,200,000
19. What amount should be recognized as accounts payable on February 15, 2022?
a. 2,700,000 c. 3,100,000
b. 3,000,000 d. 3,500,000
20. Assuming the market price of product X on December 31, 2021 is P330 per unit, how much shall
be recognized as gain on purchase commitment on December 31, 2021?
a. 0 c. 400,000
b. 100,000 d. 500,000
