ACT112 Quiz Series 2 (AY 2019-2020)
1. The inventory account of Duke Company at December 31, 2020, included the following items:
Inventory Amount
Merchandise out on consignment at sales price (including markup of 35% on selling price) P15,000
Goods purchased, in transit (shipped FOB shipping point) ….. 6,000
Goods held by Duke on consignment .. 4,500
Goods out on approval (sales price P6,000, cost P4,000) … 6,000
Based on this information, the inventory account at December 31, 2020, should be reduced by what amount? 11,750
2. A markup of 25 percent on cost is equivalent to what markup on selling price? (rounded) 20 percent
3. The following information is available for the Fister Company for 2020:
Freight-in …….. P 50,000
Purchase returns .. 185,000
Selling expenses .. 357,000
Ending inventory .. 117,000
The cost of goods sold is equal to 400% of selling expenses. Compute the cost of goods available for sale. 1,545,000
4. Hardy Company is a wholesale electronics distributor. On December 31, 2020, it prepared the following partial income statement:
Gross sales …. P600,400
Sales discounts 400
Net sales …… P600,000
Cost of goods sold:
Beginning inventory … P200,000
Net purchases 300,000
Given this information, if Hardy Company’s gross margin is 30 percent of net sales, what is the correct ending inventory balance?
80,000
5. The following information is available for the Becca Company for the three months ended June 30 of this year:
Inventory, April 1 of this year …. P1,200,000
Purchases …….. 4,500,000
Freight-in ……. 300,000
Sales … 6,400,000
The gross margin was 25 percent of sales. What is the estimated inventory balance at June 30? 1,200,000
6. Miller Company needs an estimate of its ending inventory balance. The following information is available:
Cost Retail
Sales revenue .. P180,000
Beginning inventory ….. P 35,000 62,000
Net purchases .. 100,000 135,000
Gross margin percentage . 30%
Given this information, when using the gross margin estimation method, ending inventory is approximately 9,000.
7. Petersen Menswear, Inc. maintains a markup of 60 percent based on cost. The company’s selling and administrative expenses
average 30 percent of sales. Annual sales were P1,440,000. Petersen’s cost of goods sold and operating profit for the year are (a)
Cost of Goods Sold and (b) Operating Profit 900,000; 108,000
8. On October 31, a flood at Payne Company’s only warehouse caused severe damage to its entire inventory. Based on recent history,
Payne has a gross profit of 25 percent of net sales. The following information is available from Payne’s records for the ten months
ended October 31:
Inventory, January 1 ……. P 520,000
Purchases 4,120,000
Purchase returns .. 60,000
Sales …. 5,600,000
Sales discounts … 400,000
A physical inventory disclosed usable damaged goods which Payne estimates can be sold for P70,000. Using the gross profit method,
the estimated cost of goods sold for the ten months ended October 31 should be 3,900,000.
9. The following information appears in Olsen Company’s records for the year ended December 31:
Inventory, January 1 ……. P 325,000
Purchases 1,150,000
Purchase returns .. 40,000
Freight-in …….. 30,000
Sales …. 1,700,000
Sales discounts … 10,000
Sales returns ….. 15,000
On December 31, a physical inventory revealed that the ending inventory was only P210,000. Olsen’s gross profit on net sales has
remained constant at 30 percent in recent years. Olsen suspects that some inventory may have been pilfered by one of the company’s
employees. At December 31, what is the estimated cost of missing inventory? 82,500
10. Davis Company’s accounting records indicated the following information:
Inventory, 1/1/2020. 1,000,000
Purchases during 2020 …… 5,000,000
Sales during 2020 . 6,400,000
A physical inventory taken on December 31, 2020, revealed actual ending inventory at cost was P1,150,000. Davis’ gross profit on
sales has regularly been about 25 percent in recent years. The company believes some inventory may have been stolen during the
year. What is the estimated amount of missing inventory at December 31, 2020? 50,000
11. On June 19, 2020, a fire destroyed the entire uninsured merchandise inventory of the Allen Merchandising Company. The following
data are available:
Inventory, January 1 ……. P 80,000
Purchases, January 1 through June 19 560,000
Sales, January 1 through June 19 …. 776,000
Markup percentage on cost .. 25%
What is the approximate inventory loss as a result of the fire? P19,200
12. The following information is available for Torino Corp. for its most recent year:
Net sales P3,600,000
Freight-in …….. 90,000
Purchase discounts 50,000
Ending inventory .. 240,000
The gross margin is 40 percent of net sales. What is the cost of goods available for sale? 2,400,000
13. A company sells four products: I, II, III, and IV. The company values all inventories using the lower–of-cost-or-market procedure. The
company has consistently experienced a profit margin of 20 percent of sales and expects this rate to hold for the future. Additional
information, shown below, is available for the most recent year as of December 31.
Original Cost to Estimated Cost Expected Selling
Product Cost Replace to Sell Prices
I P60 P70 P10 P100
II 70 90 20 120
III 80 60 10 60
IV 90 80 20 90
What is the reported inventory value at December 31 for one unit of each product? 60, 70, 50, 70
14. The following information is available for the Neptune Company for the three months ended March 31 of this year:
Inventory, January 1 ……. P 450,000
Purchases 1,700,000
Freight-in …….. 100,000
Sales …. 2,400,000
The gross margin was estimated to be 25 percent of sales. What is the estimated inventory balance at March 31? 450,000
15. Elrond Company began operations in 2018. During the first two years of operations, Elrond made undiscovered errors in taking its
year-end inventories that understated 2018 ending inventory by P40,000 and overstated 2019 ending inventory by P50,000. The
combined effect of these errors on reported income for the year 2018, 2019, 2020, respectively is understated 40,000 overstated
90,000 understated 50,000
16. Jupiter Company prepares monthly income statements. A physical inventory is taken only at year-end; hence, month-end inventories
must be estimated. All sales are made on account. The rate of markup on cost is 50 percent. The following information relates to the
month of May:
Accounts receivable, May 1 . P20,000
Accounts receivable, May 31 30,000
Collection of accounts receivable during May . 50,000
Inventory, May 1 .. 36,000