Question

lecture 5 inventory concepts and costing

1. the inventory card of express inc. as at february 28 is as

purchase units
price units used
jan. 10 p 100 20,000
31 10,000
feb. 8 110 30,000
9 returns from factory (1,000)
28 11,000
the inventory cost as at february 28 if the company is using:
fifo weighted average
a. p 3,300,000 p 3,120,000
b. p 3,300,000 p 3,180,000
c. p 3,150,000 p 3,120,000
d. p 3,150,000 p 3,180,000

1. suntok company had the following inventory at year end:

cost nrv
boxing gloves p 2,700,000 p 3,700,000
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. p 4,700,000 c. p 5,570,000
b. p 5,070,000 d. p 7,080,000

1. lumana company buys and sells antiques. each product is unique.

if the entity adopts pas 2 inventories, the company:
a. is required to use the specific identification method
b. is required to use the fifo method
c. is required to use the average method
d. is either a or b can be used as method

1. what is the main advantage of the perpetual inventory system over

the periodic inventory system?
a. it requires fewer journal entries
b. it does not require physical inventory counts
c. it uses more accounts to track inventory movements
d. it allows to know the exact inventory levels at any time time

Explanation:

53.

Step1: Calculate units available for sale

Initial units on Jan. 10 are 20,000. Purchased 30,000 on Feb. 8 and returns 1,000. So total units available = 20,000+30,000 - 1,000=49,000.

Step2: Calculate units sold

Units used are 10,000 + 11,000=21,000.

Step3: Calculate ending - inventory units

Ending - inventory units = 49,000 - 21,000 = 28,000.

Step4: Calculate FIFO inventory cost

Under FIFO, we assume the last - purchased units are in ending inventory. So 28,000 units come from the Feb. 8 purchase. Cost = 28,000×110 = P3,080,000+220,000 (10,000 units from the remaining of the Feb. 8 purchase after using some) = P3,300,000.

Step5: Calculate weighted - average cost

Total cost of goods available for sale=(20,000×100)+(30,000×110)=2,000,000 + 3,300,000=P5,300,000.
Weighted - average cost per unit=$\frac{5,300,000}{49,000}\approx$P108.16.
Inventory cost = 28,000×108.16≈P3,120,000.

Under the lower - of - cost - or - net - realizable - value (LCNRV) rule, we compare the cost and NRV for each item and take the lower value.
For boxing gloves, cost is P2,700,000 (lower than NRV of P3,700,000).
For boxing shoes, NRV is P1,500,000 (lower than cost of P1,800,000).
For wrist band, cost is P500,000 (lower than NRV of P660,000).
For boxing apparel, cost is P870,000 (lower than NRV of P920,000).
Total inventory = 2,700,000+1,500,000+500,000+870,000 = P5,570,000.

When each product is unique, according to PAS 2 Inventories, the specific identification method is required. This is because we can precisely identify the cost of each individual item.

Answer:

a. P 3,300,000; P 3,120,000

54.