Inventory PROBLEM 10-3

Luminous Company provided the following information at current

Source: Intermediate Accounting by Valix (2021 ed) year-end:
PROBLEM 10-1 Finished goods in storeroom, at cost including 2,000,000
overhead of P400,000
Amiable Company provided the following data at year-end:
Finished goods in transit, including freight charge of 250,000
Items counted in the bodega 4,000,000 P20,000, FOB shipping point
Items included in the count specifically segregated 100,000 Finished goods held by salesmen, at selling price, 140,000
per sales contract cost, P100,000
Items in receiving department, returned by 50,000 Goods in process, at cost of materials and direct 720,000
customer, in good condition labor
Items ordered and in the receiving department, 400,000 Materials 1,000,000
invoice not received Materials in transit, FOB destination 50,000
Items ordered, invoice received but goods not 300,000 Defective materials returned to suppliers for 100,000
received. Freight is paid by seller replacement
Items shipped today, invoice mailed, FOB shipping 250,000 Shipping supplies 20,000
point Gasoline and oil for testing finished goods 110,000
Items shipped today, invoice mailed, FOB 150,000 Machine lubricants 60,000
destination
Items currently being used for window display 200,000 Required:
Items on counter for sale 800,000
Compute cost of inventory at current year-end
Items in receiving department, refused by us 180,000
because of damage
Items included in count, damaged and unsalable 50,000
Items in the shipping department 250,000 PROBLEM 10-4

Required: Summer Company is a wholesaler of car seatcovers. At the

beginning of the current year, the entity’s inventory consisted of 90
Compute the correct amount of inventory. car seatcovers priced at P1,000 each. During the current year, the
following events occurred:
1. Purchased 800 car seatcovers on account at P1,000 each.
PROBLEM 10-2 2. Returned 50 defective car seatcovers to supplier and
received credit.
Natalia Company provided the following information:
3. Paid 600 of the car seatcovers purchased.
Materials 1,400,000 4. Sold 790 car seatcovers at P2,000 each.
Advance for material ordered 200,000 5. Received 20 car seatcovers returned by a customer and
Goods in process 650,000 gave credit. The goods were in excellent condition.
Unexpired insurance on inventories 60,000 6. Received cash for 680 of the car seatcovers sold.
Advertising catalogs and shipping cartons 150,000 7. Physical count at year-end revealed 60 units on hand.
Finished good in factory 2,000,000
Required:
Finished goods in company-owned retail store, 750,000
including 50% profit on cost a. Prepare journal entries, including adjustments to record the
Finished goods in hands consignees including 40% 400,000 above transactions assuming the company uses periodic
profit on sales system and perpetual system.
Finished goods in transit to customers, shipped 250,000 b. Determine the cost of sales under each inventory system.
FOB destination at cost
Finished foods out on approval, at cost 100,000
Unsalable finished goods, at cost 50,000
Office supplies 40,000 PROBLEM 10-5
Materials in transit shipped FOB shipping point, 330,000 Winter Company received quotations from two entities for an item of
excluding freight of P30,000 merchandise as follows:
Goods held on consignment, at sales price, cost 200,000
P150,000 From Company List price P500,000, less 20-10-10, FOB
A: shipping point, 2/10, n/30
From Company List price P500,000 less 35, FOB shipping
Required: B: point, 2/10, n/30.
Compute the correct amount of inventory. Required:
For each quotation, compute the invoice amount and the amount to
be paid by the buyer within the discount period.
PROBLEM 10-6 4. An invoice for P90,000, FOB shipping point, was received
on December 15. The receiving report indicates that the
Autumn Company provided the following transactions for the current goods were received on December 18 but across the face
year, the first year of operations. of the report is the notation “merchandise not of the same
1. Purchase of merchandise at an invoice price of P4,750,000 quality as ordered – returned for credit, December 19”. The
excluding freight. Terms are 2/10, n/30. merchandise was included in the inventory.
2. Freight paid, P250,000. The freight is allocated to each 5. An invoice for P140,000, FOB destination, was received
purchase. and recorded on January 4. The receiving report indicates
3. Cash payment on purchases, P3,717,000 of which that the goods were received on December 29. The
P1,617,000 was paid within the discount period. merchandise was included in inventory.
4. It is expected that all discounts on unpaid accounts Required:
payable will be lost.
5. On December 31, one fifth of the merchandise remains on Prepare the adjustments on December 31. Books are still open.
hand.
Required:
PROBLEM 10-9
a. Prepare journal entries to record the transactions using
gross method and net method. Corolla Company incurred the following costs:
b. Compute inventory and cost of sales under each method. Materials
Storage costs of finished goods
Delivery to customers
PROBLEM 10-7 Irrecoverable purchase taxes
Fall Company began operations in the current year. The entity used At what amount should the inventory be measured?
perpetual inventory system. A 880,000
1. During the year, Fall Company purchased merchandise B 760,000
having a gross invoice cost of P1,000,000. All purchases C 980,000
were made under the terms 2/10, n/30, FOB destination. D 940,000
2. Fall Company paid freight charge of P50,000.
3. During the year, Fall Company paid for 80% of the PROBLEM 10-10
merchandise within the discount period.
4. The remaining 20% was paid beyond the discount period. At year-end, Kerr Company purchased goods costing P500,000 FOB
5. Fall Company sold 70% of the merchandise it acquired for destination. These goods were received at year-end. The costs
cash of P1,200,000. The other 30% remained in inventory incurred in connection with the sale and delivery of the goods were:
at year-end.
Packaging for shipment 10,000
Required: Shipping 15,000
Special handling charges 25,000
Prepare journal entries to record the transactions using gross method What total cost should be included in inventory?
and net method.
A 545,000
PROBLEM 10-8 B 535,000
Myriad Company revealed the following purchase transactions C 520,000
occurred during the last few days of the fiscal year, which ends D 500,000
December 31, and in the first few days after that date.
PROBLEM 10-11
1. An invoice for P50,000, FOB shipping point, was received
and recorded on December 27. the shipment was received Seafood Company commenced operations during the year as larger
in satisfactory condition on January 2. The merchandise imported and exporter of seafood. The imports were all from one
was not included in the inventory. country overseas. The entity reported the following data:
2. An invoice for P75,000, FOB destination, was received and Purchases during the year 12,000,000
recorded on December 28. The shipment was received in Shipping costs from overseas 1,500,000
satisfactory condition on January 3. The merchandise was Shipping costs to export customers 1,000,000
not included in the inventory. Inventory at year-end 3,000,000
3. An invoice for P30,000, FOB shipping point, was received What amount of shipping costs should be included in the year-end
and recorded on January 4. The invoice showed that the inventory valuation?
goods had been shipped on December 28 and the
receiving report indicates that the goods had ben received A 250,000
on January 4. The merchandise was excluded from B 625,000
inventory. C 375,000
D 0
PROBLEM 10-12 imports
Salaries of accounting department 600,000
Stone Company had the following consignment transactions during Sales commission paid to sales agents 300,000
the current year: After-sales warranty costs 250,000
Inventory shipped on consignment to a consignee 600,000
Freight paid by Stone Company 50,000 What amount should be recorded as total cost of purchases?
Inventory received on consignment from a 800,000
consignor A 5,700,000
Freight paid by consignor 50,000 B 6,100,000
No sales of consigned goods were made during the current year. C 6,700,000
D 6,500,000
What amount should be reported as consigned inventory at year-
end?
PROBLEM 10-16
A 700,000
B 650,000 Clem Company provided the following inventory information for the
C 850,000 current year:
D 600,000
Central warehouse Held by consignees
Beginning inventory 1,100,000 120,000
PROBLEM 10-13 Purchases 4,800,000 600,000
Freight in 100,000
On October 1, 2021, Grimm Company consigned 40 freezers to
Transportation to 50,000
Holden Company costing P14,000 each for sale at P20,000 each and
consignees
paid P16,000 in transportation costs. On December 30, 2021, Holden
Freight out 300,000 80,000
Company reported the sale of 10 freezers and remitted P170,000.
Ending inventory 1,450,000 200,000
The remittance was net of the agreed 15% commission.
What amount should be recorded as consignment sales revenue for
What amount should be reported as cost of goods sold for the
2021?
current year?
A 154,000
A 4,550,000
B 170,000
B 4,850,000
C 196,000
C 5,070,000
D 200,000
D 5,120,000

PROBLEM 10-14
PROBLEM 10-17
Gray Company regularly buys sweaters and is allowed a trade
Rabb Company records purchases at gross amount but wishes to
discount of 20% and 10%.
change to recording purchases net of purchase discounts. Discounts
The entity made a purchase during the year and received an invoice available on purchases for the current year amount to P20,000. Of
with a list price of P900,000, a freight charge of P50,000, and this amount, P2,000 is still available in the accounts payable balance.
payment terms of net 30 days.
The balances at year-end before conversion are:
What amount should be recorded as cost of the purchase?
Purchases 1,000,000
A 648,000 Purchases discounts taken 8,000
B 630,000 Accounts payable 300,000
C 698,000
D 680,000 1. What amount should be reported as accounts payable at year-end
after the conversion?

PROBLEM 10-15 A 298,000

B 292,000
Brilliant Company has incurred the following costs during the current C 288,000
year: D 282,000
2. Which is not included in the entry to record the conversion from
Cost of purchases based on vendors’ invoices 5,000,000
the gross method to net method?
Trade discounts on purchases already deducted 500,000
from vendors’ invoices A Debit purchases P20,000
Import duties 400,000 B Debit purchase discounts P8,000
Freight and insurance on purchases 1,000,000 C Debit purchase discount lost P10,000
Other handling costs relating to imports 100,000 D Debit accounts payable P2,000
Brokerage commission paid to agents for arranging 200,000 PROBLEM 10-18
Wine Company recorded the purchases at net amount. On Kew Company reported accounts payable on December 31, 2021 at
December 10, the entity purchased merchandise on account, P2,200,000 before considering the following data:
P4,000,000, terms 2/10, n/30. The entity returned P300,000 of the
December 10 purchase and received credit on account. The account  Goods shipped to Kew FOB shipping point on December 22,
had not been paid on December 31. 2021 were lost in transit. The invoice cost of P40,000 was not
recorded by Kew.
At what amount should accounts payable be adjusted on December
31? On January 7, 2022, Kew filed a P40,000 claim against the
common courier.
A 74,000
B 86,000
C 80,000  On December 27, 2021, a vendor authorized Kew to return for
D 0 full credit goods shipped and billed at P70,000 on December 5,
2021.

PROBLEM 10-19 The returned goods were shipped by Kew on December 28,
2021. A P70,000 credit memo was received and recorded by
Hero Company reported inventory on December 31, 2021 at Kew on January 5, 2022.
P6,000,000 based on a physical count of goods priced at cost, and
before any necessary year-end adjustment relating to the following:
 On December 31, 2021, Kew has a P500,000 debit balance in
 Included in the physical count were goods billed to a customer accounts payable to Ross, a supplier, resulting from a P500,000
FOB shipping point on December 31, 2021. advance payment for goods to be manufactured.
These goods had a cost of P125,000 and were picked up by the
What amount should be reported as accounts payable on December
carrier on January 10, 2022,
31, 2021?
 Goods shipped FOB shipping point on December 28, 2021 from
a vendor to Hero Company were received on January 4, 2022. A 2,170,000
The invoice cost was P300,000. B 2,680,000
C 2,730,000
What amount should be reported as inventory on December 31,
D 2,670,000
2021?
A 5,875,000
PROBLEM 10-24
B 6,000,000
C 6,175,000 Megan Company counted the ending inventory on December 31,
D 6,300,000 2021 and reported the amount of P2,000,000 before any corrections.
None of the following items were included when the total amount of
PROBLEM 10-20 the ending inventory was computed:
Empty Company reported inventory on December 31, 2021 at  Goods located in Megan Company’s
P2,500,000 based on physical count priced at cost and before any warehouse are on consignment from another
necessary adjustment for the following: entity 150,000
 Merchandise costing P100,000, shipped FOB shipping point  Goods sold by Megan Company and shipped
from a vendor on December 30, 2021 was received and FOB destination were in transit on December
recorded on January 5, 2022. 31, 2021 and received by the customer on
 Goods in the shipping area were excluded form inventory January 2, 2022. 200,000
although shipment was not made until January 5, 2022.  Goods purchased by Megan Company and
The goods billed to the customer FOB shipping point on shipped FOB shipping point were in transit on
December 30, 2021 had a cost of P400,000. December 31, 2021 and received by Megan
Company on January 2, 2022 300,000
What amount should be reported as inventory on December 31,
 Goods sold by Megan Company and shipped
2021?
FOB shipping point were in transit on
A 2,500,000 December 31, 2021 and received by customer
B 2,600,000 on January 2, 2022 400,000
C 2,900,000 What amount of inventory should be reported on December 31,
D 3,000,000 2021?
A 2,500,000
B 2,350,000
C 2,900,000
D 2,750,000
PROBLEM 10-21
PROBLEM 10-25  A P1,050,000 shipment of goods to a customer on December
30, 2021 FOB destination was recorded as a sale in 2021.
Reverend Company conducted a physical count on December 31, The goods costing P840,000 and delivered to the customer on
2021 which revealed merchandise with a total cost of P5,000,000. January 5, 2022 were not included in 2021 ending inventory.
However, further investigation revealed that the following items were What amount should be reported as inventory on December 31,
excluded from the count. 2021?
 Goods sold to a customer which are being held for the customer A 9,300,000
to call at the customer’s convenience with a cost of P200,000. B 7,610,000
 A packing case containing a product costing P500,000 was C 8,100,000
standing in the shipping room when the physical inventory was D 8,450,000
taken.
The product was not included in the inventory because it was
marked “hold for shipping instructions”. PROBLEM 10-27
The investigation revealed that the customer’s order was dated
December 28, 2021, but the case was shipped and the White Company’s usual sales terms are net 60 days, FOB shipping
customer billed on January 5, 2022. point. Sales, net of returns and allowances, totaled P5,000,000 for
the year ended December 31, 2021, before year-end adjustment.
 A special machine costing P250,000 fabricated to order for a
customer was specifically segregated at the back part of the  On December 27, 2021, White Company authorized a customer
shipping room on December 31, 2021. to return, for full credit, goods shipped and billed at P50,000 on
The customer was billed on that date and the machine was December 5, 2021.
excluded from inventory although it was shipped on January 5, The returned goods were received by White Company on
2022. January 5, 2022, and a P50,000 credit memo was issued on the
 Goods in process costing P300,000 held by outside processor same date.
for further processing.  Goods with an invoice amount of P300,000 were billed to a
 Goods costing P50,000 shipped by a vendor FOB seller on customer on January 10, 2022. The goods were shipped on
December 31, 2021 and received by the entity on January 10, December 31, 2021.
2022.  Goods with an invoice amount of P200,000 were billed and
What amount of inventory should be reported on December 31, recorded on December 30, 2021. The goods were shipped on
2021? January 5, 2022.
 On January 5, 2022, a customer notified White Company that
A 5,500,000 goods billed at P500,000 and shipped on December 31, 2021
B 5,550,000 were lost in transit.
C 5,850,000
D 5,800,000 What amount of net sales should be reported for the current year?
A 5,050,000
PROBLEM 10-26 B 5,550,000
C 4,550,000
Sundown Company is preparing the 2021 year-end financial D 4,450,000
statements. Prior to any adjustments, inventory is valued at
P7,600,000.
PROBLEM 10-28
 Goods costing P250,000 were received from a vendor on
January 5, 2022. The related invoice was received and recorded Purple Company had sales of P4,000,000 during December of the
on January 12, 2022. current year. Experience has shown that merchandise equaling 7%
The goods were shipped December 31, 2021 FOB shipping of sales will be returned within 30 days and an additional 3% will be
point. returned within 90 days. Returned merchandise is readily resalable.
 Goods costing P850,000 were shipped on December 31, 2021 In addition, merchandise equaling 15% of sales will be exchanged for
to a customer FOB shipping point. merchandise of equal or greater value.
The goods were included in ending inventory for 2021 even
though the sale was recorded in 2021. What amount should be reported for net sales for the month of
 A P350,000 shipment of goods to a customer on December 31, December?
2021 FOB destination was not included in the year-end
inventory. A 3,600,000
The goods cost P260,000 and were delivered to the customer B 3,400,000
on January 15, 2022. The sale was properly recorded in 2022. C 3,120,000
D 3,000,000
 An invoice for goods costing P350,000 was received and
recorded as a purchase on December 31, 2021.
The related goods shipped FAS were in transit on December 31,
2021 and received on January 5, 2022 and were not included in
the physical inventory. PROBLEM 10-29
Yellow Company, a distributor of machinery, bought a machine from C. Parts in transit on December 31, 2021 to customers, shipped
the manufacturer in November 2021 for P500,000. FOB shipping point, on December 28, 2021, amounted to
P34,000.
On December 31, 2021, the entity sold this machine for P750,000,
under the following terms: 2% discount if paid within 30 days, 1% The customers received parts on January 6, 2022. Sales of
discount if paid after thirty days but within sixty days, or payable in P40,000 to the customers for the parts were recorded by
full within ninety days of not paid within the discount periods. Fancy Company on January 2, 2022.
However, the customer had the right to return this machine to Yellow
Company if it was unable to resell the machine before expiration of D. Retailers were holding P210,000 at cost and P250,000 at
the ninety-day payment period, in which case the customer’s retail, of goods on consignment from Fancy Company, at their
obligation to Yellow Company would be cancelled. stores on December 31, 2021.

In the net sales for the year ended December 31, 2021, what amount E. Goods were in transit from a vendor to Fancy Company on
should be included for the sale of the machine? December 31, 2021. The cost of goods was P25,000.
The goods were shipped FOB shipping point on December 29,
A 750,000
2021.
B 735,000
C 742,500
D 0 1. What amount should be reported as inventory?
A 1,300,000
PROBLEM 10-30 B 1,320,000
C 1,334,000
On October 1, 2021, Orange Company sold 100,000 gallons of D 1,090,000
heating oil at P30 per gallon. Fifty thousand gallons were delivered 2. What amount should be reported as accounts payable?
on December 15, 2021, and the remaining 50,000 gallons were
delivered on January 15, 2022. A 835,000
B 960,000
Payment terms were: 50% due on October 1, 2021, 25% on the first C 975,000
delivery, and the remaining 25% due on the second delivery. D 860,000
3. What amount should be reported as sales?
What amount of sales revenue should be recognized during 2021?
A 9,250,000
A 3,000,000 B 9,290,000
B 1,500,000 C 9,040,000
C 2,250,000 D 9,000,000
D 1,000,000

PROBLEM 10-32
PROBLEM 10-31
Quarry Company, a manufacturer of small tools, provided the
Fancy Company is a wholesale distributor of automotive replacement following information for the year ended December 31, 2021.
parts. The entity revealed the following initial amounts on December
31, 2021: Inventory at December 31 based on physical 1,750,000
count
Inventory at December 31 based on physical count 1,250,000 Accounts payable at December 31 1,200,000
Accounts payable 1,000,000 Net sales 8,500,000
Sales 9,000,000
Additional information
Additional information:
A. Included in the physical count were tools billed to a customer FOB
A. Parts held on consignment from another entity to Fancy shipping point on December 31, 2021. These tools had a cost of
Company, the consignee, amounting to P165,000, were P28,000 and were billed at P35,000.
included in the physical count on December 31, 2021, and in
accounts payable on December 31, 2021. The shipment was in loading dock waiting to be picked up by
common carrier.
B. P20,000 of parts which were purchased and paid for in
December 2021, were sold in the last of 2021 and appropriately B. Goods were in transit from a vendor to Quarry Company on
recorded as sales of 28,000. December 31, 2021.
The parts were included in the physical count on December 31, The invoice cost was P50,000, and the goods were shipped FOB
2021, because the parts were on the loading dock waiting to be shipping point on December 29, 2021.
picked up by the customers.
C.Work in process inventory costing P20,000 was sent to an outside
processor for plating on December 30, 2021.
PROBLEM 10-33
D.Tools returned by customers and held pending inspection in the 1. Which of the following should not be taken into account when
returned goods are on December 31, 2021 were not included in determining the cost of inventory?
the physical count.
A Storage costs of part-finished goods
On January 5, 2022, the tools costing P26,000 were inspected and B Trade discounts
returned to inventory. C Recoverable purchase taxes
D Import duties on shipping of inventory inward
Credit memos totaling P40,000 were issued to the customers on
the same date. 2. The cost of inventory does not include
A Salaries of factory staff
E. Tools shipped to a customer FOB destination on December 26,
B Storage cost necessary in the production process before a
2021, were in transit on December 31, 2021, and had a cost of
further production stage
P25,000.
C Abnormal amount of wasted materials
D Irrecoverable purchase taxes
Upon notification of receipt by the customer on January 5, 2022,
Quarry Company issued a sales invoice for P42,000.
3. Which of the following costs of conversion cannot be included in
cost of inventory?
F. Goods, with an invoice cost of P30,000, received from a vendor at
5:00 PM on December 31, 2021, were recorded on a receiving A Cost of direct labor
report dated January 2, 2022. B Factory rent and utilities
C Salaries of sales staff
The goods were not included in the physical count but the invoice D Factory overhead based on normal capacity
was included in accounts payable on December 31, 2021.
4. Which of the following should be taken into account when
G.Goods received from a vendor on December 26, 2021 were determining the cost of inventory?
included in the physical count.
A Storage cost of part-finished goods
B Abnormal freight in
However, the related P60,000 vendor invoice was not included in
C Recoverable purchase tax
accounts payable on December 31, 2021 because the accounts
D Interest on inventory loan
payable copy of the receiving report was lost.
5. Costs incurred in bringing the inventory to the present location
H.On January 10, 2022, a monthly freight bill in the amount of and condition include
P20,000 was received. The bill specifically related to merchandise
purchased in December 2021, one-half of which was still in the A Cost of designing product for specific customers
inventory on December 31, 2021. B Abnormal amount of wasted material
C Storage cost not necessary in the production process before
The freight charge was not included in either the inventory or in a further production stage
accounts payable on December 31, 2021. D Distribution cost

1. What amount should be reported as inventory? 6. Inventories encompass all of the following, except

A 1,883,000 A Merchandise purchased by a retailer

B 1,911,000 B Land and other property not held for sale
C 1,885,000 C Finished goods produced
D 1,925,000 D Material and supplies for use in production
2. What amount should be reported as accounts payable?
7. A property developer must classify properties that it holds for sale
A 1,330,000 in the ordinary course of business as
B 1,280,000
C 1,250,000 A Inventory
D 1,270,000 B Property, plant and equipment
3. What amount should be reported as net sales? C Financial asset
D Investment property
A 8,460,000
B 8,500,000 8. Factory supplies to be consumed in the production process are
C 8,465,000 reported as
D 8,425,000
A Inventory
B Property, plant and equipment
 C Investment property
D Prepaid expense
9. Which of the following should not be reported as inventory? PROBLEM 10-35

A Land acquired for resale by a real estate firm 1. Theoretically, cash discounts permitted should be
B Shares and bonds held for resale by a brokerage firm A Added to other income, whether taken or not
C Partially completed goods held by a manufacturing entity B Added to other income, only if taken
D Machinery acquires by a manufacturing entity C Deducted from inventory, whether taken or not
D Deducted from inventory, only if taken
10. When determining the cost of an inventory, which of the following
should not be included? 2. Which of the following generally would not be separately
A Interest on loan obtained to purchase the inventory accounted for in the computation of cost of goods sold?
B Commission paid when inventory is purchased A Trade discounts applicable to purchases
C Labor cost of the inventory when manufactures B Cash discounts taken
D Depreciation of plant equipment used in manufacturing C Purchase returns and allowances
D Cost of transportation for merchandise purchased.
PROBLEM 10-34
3. The use of purchase discount account implies that the recorded
1. Why is inventory included in the computation of net income? cost of a purchased inventory is
A To determine cost of goods sold A Invoice price
B To determine sales revenue B Invoice price plus any discount lost
C To determine merchandise returns C Invoice price less the purchase discount taken
D Inventory does not affect net income D Invoice price less the purchase discount allowable whether
taken or not
2. Which is a characteristic of perpetual inventory system?
4. The use of a discount lost account implies that cost of purchased
A Inventory purchases are debited to a purchases account. inventory is
B Inventory records are not kept for every item.
C Cost of goods sold is recorded with each sale. A Invoice price
D Cost of goods sold is determined as the amount of purchases B List price
less the change in inventory. C Invoice price less the purchase discount taken
D Invoice price less the purchase discount allowable whether or
3. Which is incorrect about the perpetual inventory method? not taken
A Purchases are recorded as debit to the inventory account. 5. The valuation of inventory on a prime cost basis
B The entry to record a sale includes a debit to cost of goods
sold and a credit to inventory A Would achieve the same results as direct costing
C After a physical inventory count, inventory is credited for any B Would exclude all overhead from inventory cost
missing inventory. C Is always achieved when standard costing is adopted
D Purchase returns are recorded by debiting accounts payable D Is always achieved when the FIFO is adopted
and crediting purchase returns and allowances.

4. An entry debiting inventory and crediting cost of goods sold would

be made when
A Merchandise is sold under periodic inventory
B Merchandise is sold under perpetual inventory
C Merchandise is returned under perpetual inventory
D Merchandise is returned under periodic inventory

5. In a periodic system, the beginning inventory is

A Net purchases minus cost of goods sold
B Net purchases minus ending inventory
C Goods available for sale minus net purchases
D Goods available for sale minus cost of goods sold.