Name: Date:

Section/Course: Professor: Dr. Jason R. Radam

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QUIZ : ELEC 01

NOTE: Strictly NO erasures in any form. Use permanent ball pen only.

Theories: (Write the capital letter of the correct answer: 2 pts. each)

1. Lower-of-cost-or-net realizable value

a. gives the lowest valuation if applied to the total inventory.
b. gives the lowest valuation if applied to major groups of inventory.
c. gives the lowest valuation if applied to individual items of inventory.
d. must be applied to major groups for taxes.

2. When the cost-of-goods-sold method is used to record inventory at net realizable value
a. there is a direct reduction in the selling price of the product that results in a loss being recorded on the income statement
prior to the sale.
b. a loss is recorded directly in the inventory account by crediting inventory and debiting loss on inventory decline.
c. only the portion of the loss attributable to inventory sold during the period is recorded in the financial statements.
d. the net realizable value figure for ending inventory is substituted for cost and the loss is buried in cost of goods sold.

3. Under International Financial Reporting Standards (IFRS), which of the following is true regarding inventory write-downs and/or
recovery of a write-down?
a. Recovery of inventory write-downs is prohibited under IFRS.
b. IFRS requires separate reporting of reversals of inventory write-downs.
c. IFRS requires companies to record write-downs in a separate loss account.
d. All of the choices are correct regarding IFRS and write-downs and/or recoveries.

4. At the end of the fiscal year, Apha Airlines has an outstanding non-cancellable purchase commitment for the purchase of 1
million gallons of jet fuel at a price of P41 per gallon for delivery during the coming summer. The company prices its inventory
at the LCNRV. If the market price for jet fuel at the end of the year is P45, how would this situation be reflected in the annual
financial statements?
a. Record unrealized gains of P4,000,000 and disclose the existence of the purchase commitment.
b. No impact.
c. Record unrealized losses of P4,000,000 and disclose the existence of the purchase commitment.
d. Disclose the existence of the purchase commitment.

5. The gross profit method of inventory valuation is invalid when

a. a portion of the inventory is destroyed.
b. there is a substantial increase in inventory during the year.
c. there is no beginning inventory because it is the first year of operation.
d. none of these.

Problems: (Write the correct amount being asked; 3 pts. each)

For Nos. 1 – 2
On December 31, 2019, the following items of merchandise inventories were provided by Holiday Company based on physical count:

Item No. of units Cost per unit Estimated unit selling price Cost to sell per unit
A 8,200 P75 P80 P10
B 3,600 P130 P160 P20
C 5,100 P90 P95 P20

1. What is the amount of inventory to be reported in the December 31, 2019 statement of financial position? __________________

2. What is the loss on inventory write-down to be reported in the 2019 statement of comprehensive income? __________________

For Nos. 3 – 4
Oslo Corporation has two products in its ending inventory, each accounted for at the lower of cost or market. Specific data with respect
to each product follows:
Product #1 Product #2
Selling price P60 P130
Historical cost 40 70
Cost to sell 10 26
Cost to complete 15 40
 In pricing its ending inventory using the lower-of-cost-or-net realizable value, what unit values should Oslo use for products #1
and #2, respectively?

3. Product 1 _________________
4. Product 2 _________________

5. Robertson Corporation acquired two inventory items at a lump-sum cost of P400,000. The acquisition included 3,000 units of product
CF, and 7,000 units of product 3B. CF normally sells for P120 per unit, and 3B for P40 per unit. If Robertson sells 1,000 units of CF,
what amount of gross profit should it recognize? _______________

6. Barber 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 mark up on cost is 50%. The following information relates to the
month of June:
Accounts Receivable, June 1 102,000
Accounts Receivable, June 30 153,000
Collection of accounts receivable during June 255,000
Inventory, June 1 183,600
Purchases of inventory during June 163,200

How much is the estimated cost of June 30, inventory? ____________

7. On the evening of June 15, 2019, a fire destroyed the entire merchandise inventory of Chronic Merchandising Corporation. The
merchandise was not insured with any insurance company. The following data were gathered:
Inventory, January 1 250,000
Purchases, January 1 to June 15 1,500,000
Sales, January 1 to June 15 2,000,000
Mark up percentage on cost 25%

What is the approximate inventory loss as a result of the fire? ____________

8. The following information is available for the Cherubim Company for the three months ended March 31, 2019:

Inventory, January 1, 2019 1,200,000

Purchases 4,500,000
Freight In 300,000
Sales 6,400,000

The gross profit was 25% of sales.

What is the estimated inventory balance at March 31, 2019? ____________

9. Lark Company sells its merchandise at a gross profit of 30%. The following figures are among those pertaining to Lark operations
for the six months ended June 30, 2019:

Sales – P200,000; Beginning Inventory – P50,000; Purchases – P130,000

On June 30, 2019, all of Lark inventory was destroyed by fire. What is the estimated cost of this destroyed inventory? __________

10. On September 14, 2019, a typhoon damaged a warehouse of Goodness Corporation. The entire company and many accounting
records stored in the warehouse were completely destroyed. Although the inventory was not insured, a portion could be sold for
scrap. Through the use of microfilmed records, the following data were gathered:

Inventory, January 1 375,000

Purchases, January 1 to September 14 1,385,000
Cash Sales, January 1 to September 14 225,000
Collection of accounts receivable, Jan. 1 to Sept. 14 2,115,000
Accounts receivable, January 1 175,000
Accounts receivable, September 14 265,000
Salvage value of damaged inventory 5,000
Gross profit percentage on sales 32%

How much is the value of inventory loss? ____________

11. At December 31, 2019, the following information was available from Emperor Co.’s accounting records:

Cost Retail
Inventory, Jan 1 220,500 304,500
Purchases 1,249,500 1,732,500
Additional mark ups - 63,000
Available for sale 1,470,000 2,100,000

Sales for the year totaled 1,659,000. Markdown amounted to 21,000. What is the cost of Emperor’s inventory at December 31,
2019 under the conservative retail inventory method? ____________
12. Happiness Department Store uses the retail inventory method to approximate the lower cost or market. The following information
pertains to the month of August:
Cost Retail
Cost of goods available for sale 720,000 900,000
Net mark ups 100,000
Net mark downs 40,000
Sales 680,000

What was the appropriate August 31 inventory using the lower of cost or market method? ____________

For Nos. 13 – 15
Sulu Co. uses the retail inventory method to estimate its inventory for interim statement purposes. Data relating to the inventory
computation at June 30, 2019 are as follows: (Round cost ratio to 2 decimals)

Cost Retail
Inventory, Jan 1 820,000 1,262,800
Net purchases 2,280,000 3,607,200
Net mark-ups 450,000
Net markdowns 320,000
Sales 4,350,000
Sales returns 300,000
Employee discount 100,000
Sales discount 80,000
Normal shrinkage 50,000

13. What is the estimated cost of June 30, 2019 inventory using the average method? ____________

14. What is the estimated cost of June 30, 2019 inventory using the conservative method? ____________

15. What is the estimated cost of June 30, 2019 inventory using the FIFO method? ____________

** End of Quiz **

“God has said, ‘Never will I leave you; never will I forsake you.’” – Hebrews 13:5