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Inventories problems with solutions

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Inventories
Problem 1
You are engaged to audit the financial statements of M Company for the fiscal year ended June 30,
2020. You have observed the taking of physical inventory on that date. All merchandise received up to
and including June 30, 2020 have been included in the physical count. The invoices for purchases of
merchandise entered in the purchase journal for the months of June and July 2020, respectively are
shown below:
June 2020
FOB
Date of Invoice
Date Received
Amount
Destination
June 20
June 23
P34,000
Shipping point
June 20
June 30
20,000
Shipping point
June 24
July 6
38,000
Destination
July 4
June 29
50,000
Destination
June 29
July 3
45,000
Shipping point
June 29
June 30
64,000
July 2020
FOB
Date of Invoice
Date Received
Amount
Destination
July 3
June 30
P65,000
Shipping point
June 28
July 5
20,000
Shipping point
July 2
June 29
18,000
Destination
June 30
July 3
48,000
Destination
June 28
June 30
30,000
Shipping point
July 3
July 4
44,000
The trial balance of M Company showed the following balances as of June 30, 2020:
Inventory, July 1, 2019
P900,000
Freight In
82,000
Purchases
8,400,000
Accounts Payable
450,000
The inventory count sheet on June 30 showed a total cost of inventory of P690,000.
Unless the goods are received at an earlier date, the invoice date is the date of shipment by the supplier.
You also obtained the following information:

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(a) Goods that had been segregated for certain customers with total sales price of P100,000 were
recorded as sales in June, although deliveries were made in July. 70% of these goods are stock
items, while the remainder were manufactured to customers’ specifications. The corresponding
goods were excluded from the physical count. The company maintains a markup rate of 25% on
sales price.
(b) An invoice for freight amounting to P9,600 was received on July 6, 2020, for purchases made
during the first half of June. 60% of such purchases had already been sold as of June 30.
How much is the adjustment to inventory?
How much is the cost of sales?
Problem 2
A physical count of inventory at December 31, 2020 revealed that V Incorporated had inventory on hand
at that date with a cost of P441,800. The annual audit identified that the following items were excluded
from this amount:
Merchandise of P61,000 is held by V Incorporated on consignment. The consignor is G Company.
Merchandise costing P38,000 was shipped by V Incorporated FOB destination to a customer on
December 31, 2020.
Merchandise costing P46,000 was shipped by V Incorporated FOB shipping point to a customer
on December 29, 2020. The customer was scheduled to receive the goods on January 6, 2021.
Merchandise costing P83,000 shipped by a vendor FOB destination on December 31, 2020 was
received by V Incorporated on January 4, 2021.
Merchandise costing P51,000 purchased FOB shipping point was shipped by the supplier on
December 31, 2020 and received by V Incorporated on January 5, 2021.
How much is the amount of inventory to be presented by V Incorporated on statement of financial
position at December 31, 2020?
Problem 3
The management of Ralph Company has engaged you to audit its 2020 financial statements. The
company’s accounting period ends on December 31. You verified that on November 30, the correct
inventory level was 60,000 units. A review of the December purchase orders to various suppliers showed
the following. Only merchandise received up to December 31, 2020 were recorded as purchases by
Ralph.
Date of P.O.
Invoice Date
Quantity in
Units
Date Shipped
Date Received
12/02/2020
01/04/2021
10,000
01/03/2021
01/04/2021

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Inventories Problem 1 You are engaged to audit the financial statements of M Company for the fiscal year ended June 30, 2020. You have observed the taking of physical inventory on that date. All merchandise received up to and including June 30, 2020 have been included in the physical count. The invoices for purchases of merchandise entered in the purchase journal for the months of June and July 2020, respectively are shown below: June 2020 FOB Destination Shipping point Shipping point Destination Destination Shipping point Date of Invoice June 20 June 20 June 24 July 4 June 29 June 29 Date Received June 23 June 30 July 6 June 29 July 3 June 30 Amount P34,000 20,000 38,000 50,000 45,000 64,000 Date of Invoice July 3 June 28 July 2 June 30 June 28 July 3 Date Received June 30 July 5 June 29 July 3 June 30 July 4 Amount P65,000 20,000 18,000 48,000 30,000 44,000 July 2020 FOB Destination Shipping point Shipping point Destination Destination Shipping point The trial balance of M Company showed the following balances as of June 30, 2020: Inventory, July 1, 2019 Freight In Purchases Accounts Payable P900,000 82,000 8,400,000 450,000 The inventory count sheet on June 30 showed a total cost of inventory of P690,000. Unless the goods are received at an earlier date, the invoice date is the date of shipment by the supplier. You also obtained the following information: (a) Goods that had been segregated for certain customers with total sales price of P100,000 were recorded ...
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