1

CHAPTER 4

Multiple Choices Computational

1. b 6. b
2. b 7. c
3. b 8. b
4. b 9. a
5. b 10. A

Multiple Choices Computational

1. (a)
Cost of
Date of Issue Purchase Lot Units x Cost Materials Issued
5/15 5/5 15 x P20 = P300
5/19 BI 10 x P15 = 150
5/30 5/5 & 5/24 (5 x P20) + (10 x P18) = 280
P730
Ending inventory: 5 (from 5/24 purchase) x P18 = P90

2. (a)

(10 x P15) + (20 x P20) + (15 x P18) = P18.222

45

Cost of materials issued: 40 x P18.222 = P729.88

Ending inventory: 5 x P18.222 = P91.11

3. (a)
Cost of
Date Units Unit Cost Materials Issued
BI 10 P15 P150
5/5 20 20 400
5/24 10 18 180
40 P730
4. (c)

Purchases Issued Balance

Unit Unit Total Unit Total
Date Units Cost Units Cost Cost Units Cost Cost
BI 10 P15 - - - 10 P15.000 P150.00
5/5 20 20 - - - 30 18.333(a) 550.00
5/15 - - 15 P18.333 P275.00 15 18.333 275.00
5/19 - - 10 18.333 183.33 5 18.333 91.67
5/24 15 18 - - - 20 18.085(b) 361.68
5/30 - - 15 18.084 271.26 5 18.084 90.42

(a) (10 x P15) + (20 x P20) / 30 = P18.333

(b) (5 x P18.333) + (15 x P18) / 20 = P18.084
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5. (a)

Purchases Issued Balance

Unit Unit Total Unit
Date Units Cost Units Cost Cost Units Cost Total
BI 10 P15 - - - 10 P15 P150
5/5 20 20 - - - 30 (a) 550
5/15 - - 15 P20 P300 15 (b) 250
5/19 - - 10 (c) 175 5 15 75
5/24 15 18 - - - 20 (d) 345
5/30 - - 15 18 270 5 15 P75

(a) (10 x P15) + (20 x P20) = P550

(b) (10 x P15) + (5 x P20) = P250
(c) (5 x P20) + (5 x P15) = P175
(d) (5 x P15) + (15 x P18) = P345

6. (d)

Purchases Issued Balance

Date Units Price Amount Units Price Amount Units Price Amount
1/1 - - - - - - 2,000 9.775 19,550
1/6 1,500 10.300 15,450 - - - 3,500 10.000(a) 35,000
1/7 - - - 1,800 10.000 18,000 1,700 10.000 17,000
1/26 3,400 10.750 36,550 - - - 5,100 10.500(b) 53,550
1/31 - - - 3,200 10.500 33,600 1,900 10.500 19,950

(a) (P19,550 + P15,450) / (2,000 + 1,500) = P10.000

(b) (P17,000 + P36,550) / (1,700 + 3,400) = P10.500

7. (c)

P19,550 + P15,450 + P36,550 x 1,900 = P19,702

6,900

8. (a)

Received Issued Balance

Balance 480 x P4.80 = P2,304
PO30 600 x P4.90 = P2,940 480 x P4.80 = P2,304
600 x P4.90 = P2,940
R46 175 x P4.80 = P 840 305 x P4.80 = P1,464
600 x P4.90 = P2,940
R49 225 x P4.80 = P1,080 80 x P4.80 = P 384
600 x P4.90 = P2,940
R50 80 x P4.80 = P 384
200 x P4.90 = P 980 400 x P4.90 = P1,960
PO96 400 x P4.95 = P1,980 400 x P4.90 = P1,960
400 x P4.95 = P1,980
R52 310 x P4.90 = P1,519 90 x P4.90 = P 441
400 x P4.95 = P1,980
RM24 (20) x P4.90 = (P98) 110 x P4.90 )
400 x P4.95 )= P2,519
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9. (a)

Received Issued Balance *

Balance 480 x P4.80 = P2,304.00
PO30 600 x P4.90 = P2,940 1,080 x P4.856 = P5,244.48
R46 175 x P4.856 = P 849.80 905 x P4.856 = P4,394.68

R49 225 x P4.856 = P1,092.60 680 x P4.856 = P3,302.08

R50 280 x P4.856 = P1,359.68 400 x P4.856 = P1,942.40

PO96 400 x P4.95 = P1,980 800 x P4.903 = P3,922.40

R52 310 x P4.903 = P1,519.93 490 x P4.903 = P2,402.47

RM24 (20) x P4.856 = P 97.12 510 x P4.901 = P2,499.59

* Answers may vary due to rounding.

10. (a)

Material Quantity Cost NRV Valuation

AA 460 P140 P130 P 59,800
BB 830 85 90 70,550
CC 1,290 120 145 154,800
DD 580 65 55 31,900
P317,050

11. (d)

Materials Cost NRV

AA P64,400 P59,800
BB 70,550 74,700
CC 154,800 187,050
DD 37,700 31,900
P327,450 P353,450

Since cost is lower, use P327,450 as the inventory valuation.

12. (a)

Materials Quantity Cost NRV Total Cost Total NRV

Group I
AA 460 P140 P130 P64,400 P59,800
BB 830 85 90 70,550 74,700
Total P134,950 P134,500
Group II
CC 1,290 120 145 P154,800 P180,500
DD 580 65 55 37,700 31,900
Total P192,500 P218,950
Valuation Summary
Basis Valuation
Group I NRV P134,500
Group II Cost 192,500
Inventory Valuation P327,000
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13. (b)

Finished goods, May 1, 2010 P129,640

Cost of goods manufactured 395,440
Total cost of goods available 525,080
Finished goods, May 31 (142,840)
Loss on inventory write-down 9,740
Cost of goods sold P391,980

14. (a)

Finished goods, June 1 P 290,540

Cost goods manufactured 805,820
Total cost of goods available 1,096,360
Finished goods, June 30 ( 276,760)
Recovery from Inventory write-down ( 10,720)
Cost of goods sold P 808,880

15. (a)

Cost P 110,492
NRV (P134,315 - P26,855) 107,460
Inventory write-down P 3,032

16. (a)

Balance of Allow. for Inventory Write-down P 8,930

Required balance of Allow account:
Cost of inventory P296,369
NVV 291,250 5,119
Recovery P 3,811
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Solutions to Problems

Problem 4-1

FIFO
RECEIVED ISSUED BALANCE
DATE REF. UNITS PRICE AMOUNT UNITS PRICE AMOUNT UNITS PRICE AMOUNT
Jan. 1 Bal. 150 40.00 P 6,000.00
6 PO74 200 40.50 8,100 150 40.00)
200 40.50) 14,100.00
12 R18 150 40.00)
75 40.50) 9,037.50 125 40.50 5,062.50
14 PO83 250 41.00 10,250 125 40.50)
250 41.00) 15,312.50
17 R23 125 40.50)
75 41.00) 8,137.50 175 41.00 7,175.00
31 R19 40 41.00 1,640 135 41.00 5.535.00

LIFO
RECEIVED ISSUED BALANCE
DATE REF. UNITS PRICE AMOUNT UNITS PRICE AMOUNT UNITS PRICE AMOUNT
Jan. 1 Bal. 150 40.00 P 6,000.00
150 40.00
6 200 40.50 14,100.00
12 R18 200 40.50)
25 40.00) 9,100.00 125 40.00 5,000.00
14 PO83 250 41.00 10,250 125 40.00)
250 41.00) 15,525.00
17 R23 200 41.00 8,200.00 125 40.00)
50 41.00) 7,050.00
31 R19 40 41.00 1,640 125 40.00)
10 41.00) 5,410

MOVING AVERAGE
RECEIVED ISSUED BALANCE
DATE REF. UNITS PRICE AMOUNT UNITS PRICE AMOUNT UNITS PRICE AMOUNT
Jan. 1 Bal. 150 40.00 P 6,000.00
6 PO74 200 40.50 8,100 350 40.30 14,105.00

12 R18 225 40.30 9,067.50 125 40.30 5,037.50

14 PO83 250 41.00 10,250 375 40.80 15,282.50

17 R23 200 40.80 8,160 175 40.80 7,122.50

31 R19 40 40.80 1,632.00 135 40.80 5,490.50

 6

Problem 4-2

LOWER OF COST OR NRV BY ITEM

COST NRV PER VALUATION LOWER OF

MATERIAL QUANTITY PER UNIT UNIT BASIS COST OR NRV
X-1 100 P100.00 P110.00 Cost P10,000.00
X-2 200 150.00 130.00 NRV 26,000.00
X-3 120 160.00 150.00 NRV 18,000.00
A-4 120 50.00 45.00 NRV 5,400.00
A-5 110 75.00 72.50 NRV 7,975.00
A-6 25 60.00 63.00 Cost 1,500

Inventory valuation P68,875.00

LOWER OF TOTAL COST OR TOTAL NRV

COST NRV PER TOTAL TOTAL

MATERIAL QUANTITY PER UNIT UNIT COST NRV
X-1 100 P100.00 P110.00 P10,000.00 P11,000.00
X-2 200 150.00 130.00 30,000.00 26,000.00
X-3 120 160.00 150.00 19,200.00 18,000.00
A-4 120 50.00 45.00 6,000.00 5,400.00
A-5 110 75.00 72.50 8,250.00 7,975.00
A-6 25 60.00 63.00 1,500.00 1,575.00

Total P74,950.00 P69,950.00

Inventory Valuation P69,950.00

LOWER OF TOTAL COST OR TOTAL NRV BY GROUP

COST NRV PER TOTAL TOTAL
MATERIAL QUANTIT PER UNIT UNIT COST NRV
Y
X-1 100 P100.00 P110.00 P10,000.00 P11,000.00
X-2 200 150.00 130.00 30,000.00 26,000.00
X-3 120 160.00 150.00 19,200.00 18,000.00
Total Group I P59,200.00 P55,000.00
A-4 120 50.00 45.00 6,000.00 5,400.00
A-5 110 75.00 72.50 8,250.00 7,975.00
A-6 25 60.00 63.00 1,500.00 1,575.00
Total Group II P15,750.00 P14,950.00

Summary of Inventory Valuation:

MATERIAL BASIS VALUATION

Group I Market P55,000.00
Group II Market 14,950.00
Inventory valuation P69,950.00
 7

Problem 4-3

FIFO METHOD

Material A-42
RECEIVED ISSUED BALANCE
DATE REF. UNITS PRICE AMOUNT UNITS PRICE AMOUNT UNITS PRICE AMOUNT
May 1 Bal. 271 P9.50 P2,574.50
2 R032 110 9.50 1,045.00 161 9.50 1,529.50
3 PO507 650 10.20 6,630 161 9.50)
650 10.20) 8,159.50
8 R036 150 9.50 1,425.00 11 9.50)
650 10.20) 6,734.50
31 R082 11 9.50)
199 10.20) 2,134.30 451 10.20 4,600.20

FIFO METHOD

Materials B-18
RECEIVED ISSUED BALANCE
DATE REF. UNITS PRICE AMOUNT UNITS PRICE AMOUNT UNITS PRICE AMOUNT
May 1 Bal. 83 P7.00 P 581.00
3 PO507 650 6.50 4,225.00 83 7.00)
650 6.50) 4,806.00
6 R034 83 7.00)
92 6.50) 1,179.00 558 6.50 3,627.00
12 R046 80 6.50 520.00 478 6.50 3,107.00
26 PO061 650 5.90 3,835.00 478 6.50)
650 5.90) 6,942.00
31 R082 382 6.50 2,483.00 96 6.50)
650 5.90) 4,459.00
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Problem 4-3 (continued)

MOVING AVERAGE METHOD

Material A-42
RECEIVED ISSUED BALANCE
DATE REF. UNITS PRICE AMOUNT UNITS PRICE AMOUNT UNITS PRICE AMOUNT
May 1 Bal. 271 P9.50 P2,574.50

2 R032 110 9.50 1,045.00 161 9.50 1,529.50

3 PO507 650 10.20 6,630.00 811 10.06 8,159.50

8 R036 150 10.06 1,509.00 661 10.06 6,650.50

31 R082 210 10.06 2,112.60 451 10.06 4,537.90

MOVING AVERAGE METHOD

Materials B-18
RECEIVED ISSUED BALANCE
DATE REF. UNITS PRICE AMOUNT UNITS PRICE AMOUNT UNITS PRICE AMOUNT
May 1 Bal. 83 P7.00 P 581.00

3 PO507 650 6.50 4,225.00 733 6.56 4,806.00

6 R034 175 6.56 1,148.00 558 6.56 3,658.00

12 R046 80 6.56 524.80 478 6.56 3,133.20

26 PO061 650 5.90 3,835.00 1,128 6.18 6,968.20

31 R082 382 6.18 2,360.80 746 6.18 4,607.40
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Problem 4-4

Req 1: Loss on inventory write-down 2,910

Allowance for inventory write-down 2,910
To record loss resulting from decline in Net
Re3alizable Value of inventory.

Req. 2: Allowance for inventory write-down 41,925

Recovery from inventory write-down 41,925
To record recovery resulting from adjustment
of allowance account.

Req. 3: Allowance for inventory write-down 61,980

Recovery from inventory write-down 61,980
To record recovery resulting from adjustment
of allowance account.

Problem 4-5

Req. 1: No entry is needed, cost is lower than market.

Req. 2: Loss on inventory write-down 6,350

Allowance for inventory write-down 6,350
To record loss resulting from decline in net
realizable value of inventory.

Req. 3: Allowance for inventory write-down 6,350

Recovery from inventory write-down 6,350
To record recovery resulting from adjustment
of allowance account.

Req. 4: 2008: Inventory, at cost, Lower of cost or NRV P365,900

2009: Inventory, at cost P348,105

Less Allowance for inventory
Write-down 6,350 P341,755

2010: Inventory, at cost, lower of cost or NRV P337.740

Note: In 2010 the cost of inventory is higher than market. Therefore, the
allowance of Inventory write-down is not needed. Inventory on the balance
sheet will be shown at cost.
 10

Problem 4-6

Goodson Printers
Income Statement
Year Ended January 31, 2010

Sales P729,370
Sales returns and allowances 48,211
Net sales 681,159
Cost of goods sold:
Finished goods inventory, Feb. 1 P 47,910
Cost of goods manufactured 422,280
Cost goods available 470,190
Finished goods inventory, Jan 31 49,620
Total 420,570
Loss on inventory write-down 9,682 430,252
Gross profit 250,907
Operating expenses
Selling expenses 96,357
Administrative expenses 60,061 156,418
Net income before provision for income tax 94,489
Provision for income tax 28,347
Net income after income tax P 66,141

Problem 4-7

FIFO METHOD
RECEIVED ISSUED BALANCE
DATE REF. UNITS PRICE AMOUNT UNITS PRICE AMOUNT UNITS PRICE AMOUNT
Mar. 1 Bal 1,000 125 125,000
5 R091 400 125 50,000 600 125 75,000
9 PO016 600 140 84,000 600 125)
600 140) 159,000
13 R094 600 125)
250 140) 110,000 350 140 49,000
22 PO023 600 145 87,000 350 140)
600 145) 136,000
29 R098 250 140 35,000 100 140)
145) 101,000

MOVING AVERAGE METHOD

RECEIVED ISSUED BALANCE
DATE REF. UNITS PRICE AMOUNT UNITS PRICE AMOUNT UNITS PRICE AMOUNT
Mar 1 Bal 1,000 125.00 125,000
5 R091 125 125 50,000 600 125.00 75,000

9 Po016 600 140 84,000 1,200 132.50 159,000

13 R094 850 132.50 112,625 350 132.50 46,375

22 PO023 600 145 87,000 950 140.40 133,375

31 R098 250 140.40 35,100 700 140.40 98,275

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Problem 4-8

FIFO METHOD

Material Plywood Reorder Point 300

Number B-84 Reorder Quantity 650

RECEIVED ISSUED BALANCE

DATE REF. UNITS PRICE AMOUNT UNITS PRICE AMOUNT UNITS PRICE AMOUNT
Nov. 1 Bal 271 P95 P25,745
1 R71 135 95 12,825 136 95 12,920
3 PO42 650 88 57,200 136 95)
650 88) 70,120
7 R36 136 95)
29 88) 15,472 621 88 54,648
12 R76 80 88 7,040 541 88 47,608
21 R76 304 88 26,752 237 88 20,856
26 PO47 650 85 55,250 237 88)
650 85) 76,106
31 R82 210 88 18,480 27 88)
650 85) 57,626

FIFO METHOD

Materials Plastic Reorder Point 300

Number R-36 Reorder Quantity 650

RECEIVED ISSUED BALANCE

DATE REF. UNITS PRICE AMOUNT UNITS PRICE AMOUNT UNITS PRICE AMOUNT
Nov. 1 Bal 83 70 P5,810
3 PO42 650 76 49,400 83 70)
650 76) 55,210
4 R73 83 70)
52 76) 9,762 598 76 45,448
7 R74 165 76) 433 76 32,908
12 R76 80 76) 6,080 353 76 26,828
26 PO47 650 79 51,350 353 76)
650 79) 78,178
31 R82 353 76)
30 79) 29,198 620 79 48,980
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Problem 4-8 (continued)

MOVING AVERAGE METHOD

Material Plywood Reorder Point 300

Number B-84 Reorder Quantity 650

RECEIVED ISSUED BALANCE

DATE REF. UNITS PRICE AMOUNT UNITS PRICE AMOUNT UNITS PRICE AMOUNT
Nov. 1 Bal 271 P95 P25,745

1 R71 135 95 12,875 136 95 12,920

3 PO42 650 88 57,200 786 89.2 70,120

7 R74 165 89.20 14,718 621 89.2 55,402

12 R76 80 89.20 7,136 541 89.2 48,266

21 R79 304 89.20 27,117 237 89.2 21,149

26 PO47 650 85 55,250 887 86.1 76,399

31 R82 210 86.1 18,081 677 86.1 58,318

MOVING AVERAGE METHOD

Materials Plastic Reorder Point 300

Number R-36 Reorder Quantity 650

RECEIVED ISSUED BALANCE

DATE REF. UNITS PRICE AMOUNT UNITS PRICE AMOUNT UNITS PRICE AMOUNT
Nov. 1 Bal 83 70 P5,810

3 PO42 650 76 49,400 733 75.32 55,210

4 R73 135 75.32 10,168 598 75.32 45,042

7 R74 165 75.32 12,438 433 75.32 32,604

12 R76 80 75.32 6,026 353 75.32 26,578

26 PO47 650 79 51,350 1003 77.70 77,928

31 R82 383 77.70 29,759 620 77.70 48,168

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Problem 4-9

(1) December 31, 2009:

Material Units Unit Cost Total Cost

AB 10,000 P60 P 600,000
5,000 50 250,000
15,000 P 850,000

XY 14,500 P25 362,500

Inventory valuation (FIFO) P1,212,500

(2) December 31, 2010:

Material Units Unit Cost Total Cost

AB 16,000 P80 P1,280,000
XY 20,000 35 700,000
Inventory valuation (FIFO) P1,980,000

(3) December 31, 2010:

Material AB Units Unit Cost Total Cost

Beginning inventory 15,000 P 850,000
Purchases, Feb. 3,000 P70 210,000
Purchases, May 12,000 75 900,000
Purchases, Oct. 20,000 80 1,600,000
Total 50,000 P2,750,000

Material XY Units Unit Cost Total Cost

Beginning inventory 14,500 P 362,500
Purchases, Feb. 35,000 P30 1,050,000
Purchases, Dec. 30,500 35 1,067,500
Total 80,000 P2,480,000

Inventory valuation (Average Costing Method)

Material AB: P2,750,000 / 50,000 X 16,000 = P 880,000
Material XY: P2,480,000 / 80,000 X 20,000 = 620,000
Total P1,500,000

(4) Net income will decrease, since the ending inventory under the average method in
2010 is smaller than the ending inventory under the FIFO method.
 14

Problem 4-10

Units available for sale 42,000

Units sold (P2,800 / 100) 28,000
Ending inventory 14,000

FIFO: Units Unit Cost Total Cost

September 5 2,000 P43.00 P 86,000
25 12,000 42.50 510,000
Total 14,000 P596,000

WEIGHTED AVERAGE:
(P1,753,500 / 42,000) 14,000 41.75 584,500

AVERAGE FIFO
Available for sale P1,753,500 P1,753,500
Less ending inventory 584,500 596,000
Cost of sales P1,169,000 P1,157,500
(Sch. 1) (Sch. 2)

Problem 4-11

2008 2009 2010

Cost of sales Average P1,500,000 P2,000,000 P2,400,000
Understatement of ending inventory:
2008 (150,000) 150,000
2009 (200,000) 200,000
2010 (270,000)
Cost of sales FIFO P1,350,000 P1,950,000 P2,330,000

Shang Company
Income Statement FIFO
Years Ended December 31, 2008, 2009 and 2010
2008 2009 2010
Sales P3,000,000 P4,000,000 P4,800,000
Cost of sales FIFO 1,350,000 1,950,000 2,330,000
Gross profit 1,650,000 2,050,000 2,470,000
Operating expenses 800,000 900,000 1,000,000
Net income P 850,000 P1,150,000 P1,470,000

Proof:
Net income AVERAGE P 700,000 P1,100,000 P1,400,000
Understatement of ending inventory:
2008 150,000 (150,000)
2009 200,000 (200,000)
2010 270,000
Net income FIFO P 850,000 P1,150,000 P1,470,000
 15

Problem 4-12

Valuation at
Lower of Cost
Inventory Units Unit Cost NRV per unit or NRV
Materials:
R-10 1,000 P110 P100 P 100,000
S-11 2,000 250 260 500,000
T-12 3,000 300 330 900,000
Goods in Process:
X-20 4,000 500 480 1,920,000
Y-21 5,000 650 620 3,100,000
Finished Goods:
A-30 2,000 800 790 1,580,000
B-31 2,000 730 780 1,460,000
Ending inventory at lower of cost or NRV P9,560,000

Problem 4-13

Valuation at
Lower of Cost
Materials Units Unit Cost NRV per Unit or NRV
AA 1,000 P120 P150 P120,000
BB 1,500 110 120 165,000
CC 1,200 150 140 168,000
DD 1,800 140 160 252,000
EE 1,700 130 160 221,000
Ending inventory at lower of cost or NRV P926,000

Problem 4-14

Valuation at
Lower of Cost
Product Units Unit Cost NRV per unit or NRV
A-1 700 P700 P650 P650
B-2 495 475 745 475
C-3 255 255 250 250
D-4 450 450 740 450