1

CHAPTER 4
Multiple Choices Computational
1.
2.
3.
4.
5.

b
b
b
b
b

6.
7.
8.
9.
10.

b
c
b
a
A

Multiple Choices Computational

1.

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

2.

Purchase Lot
5/5
BI
5/5 & 5/24

(a)
(10 x P15) + (20 x P20) + (15 x P18)
45

P18.222

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

Ending inventory: 5 x P18.222 = P91.11
3.

(a)
Date
BI
5/5
5/24

4.

Units
10
20
10
40

Unit Cost
P15
20
18

(c)
Purchases

Date
BI
5/5
5/15
5/19
5/24
5/30
(a)
(b)

Cost of
Materials Issued
P150
400
180
P730

Units
10
20
15
-

Unit
Cost
P15
20
18
-

Units
15
10
15

Issued
Unit
Cost
P18.333
18.333
18.084

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

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

Total
Cost
P275.00
183.33
271.26

Units
10
30
15
5
20
5

Balance
Unit
Cost
P15.000
18.333(a)
18.333
18.333
18.085(b)
18.084

Total
Cost
P150.00
550.00
275.00
91.67
361.68
90.42

2
5.

(a)
Purchases

Date
BI
5/5
5/15
5/19
5/24
5/30

Units
10
20
15
-

(a)
(b)
(c)
(d)

(10 x P15)
(10 x P15)
(5 x P20)
(5 x P15)

6.

(d)

Date
1/1
1/6
1/7
1/26
1/31

Unit
Cost
P15
20
18
-

Units
1,500
3,400
-

+
+
+
+

Units
15
10
15

(20 x P20)
(5 x P20)
(5 x P15)
(15 x P18)

Purchases
Price
10.300
10.750
-

=
=
=
=

Issued
Unit
Cost
P20
(c)
18

Amount
15,450
36,550
-

Issued
Price
10.000
10.500

Units
1,800
3,200

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

(P17,000 + P36,550) / (1,700 + 3,400) =

7.

(c)
P19,550 + P15,450 + P36,550
6,900

Amount
18,000
33,600

Units
2,000
3,500
1,700
5,100
1,900

Balance
Price
9.775
10.000(a)
10.000
10.500(b)
10.500

Amount
19,550
35,000
17,000
53,550
19,950

P10.000
P10.500

x 1,900 = P19,702

Issued

600 x P4.90 = P2,940

R46

175 x P4.80 = P 840

R49

225 x P4.80 = P1,080

R50

80 x P4.80 = P 384
200 x P4.90 = P 980

PO96

Total
P150
550
250
75
345
P75

(a)
Received

Balance
PO30

Units
10
30
15
5
20
5

Balance
Unit
Cost
P15
(a)
(b)
15
(d)
15

P550
P250
P175
P345

(a)
(b)

8.

Total
Cost
P300
175
270

400 x P4.95 = P1,980

R52

310 x P4.90 = P1,519

RM24

(20) x P4.90 = (P98)

480
480
600
305
600
80
600

x
x
x
x
x
x
x

Balance
P4.80 = P2,304
P4.80 = P2,304
P4.90 = P2,940
P4.80 = P1,464
P4.90 = P2,940
P4.80 = P 384
P4.90 = P2,940

400
400
400
90
400
110
400

x
x
x
x
x
x
x

P4.90 =
P4.90 =
P4.95 =
P4.90 =
P4.95 =
P4.90 )
P4.95 )=

P1,960
P1,960
P1,980
P 441
P1,980
P2,519

3
9.

(a)
Received

175 x P4.856 = P 849.80

Balance *
480 x P4.80 = P2,304.00
1,080 x P4.856 = P5,244.48
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

Balance
PO30
R46

PO96

Issued

600 x P4.90 = P2,940

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

510 x P4.901 = P2,499.59

97.12

* Answers may vary due to rounding.

10.

(a)
Material
AA
BB
CC
DD

11.

Quantity
460
830
1,290
580

Cost
P140
85
120
65

NRV
P130
90
145
55

Valuation
P 59,800
70,550
154,800
31,900
P317,050

(d)
Materials
AA
BB
CC
DD

Cost
P64,400
70,550
154,800
37,700
P327,450

NRV
P59,800
74,700
187,050
31,900
P353,450

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

12.

(a)

Materials
Group I
AA
BB
Total
Group II
CC
DD
Total
Valuation Summary
Group I
Group II
Inventory Valuation

Quantity

Cost

NRV

Total Cost

Total NRV

460
830

P140
85

P130
90

P64,400
70,550
P134,950

P59,800
74,700
P134,500

1,290
580

120
65

145
55

P154,800
37,700
P192,500

P180,500
31,900
P218,950

Basis
NRV
Cost

Valuation
P134,500
192,500
P327,000

4
13.

(b)
Finished goods, May 1, 2010
Cost of goods manufactured
Total cost of goods available
Finished goods, May 31
Loss on inventory write-down
Cost of goods sold

14.

P129,640
395,440
525,080
(142,840)
9,740
P391,980

(a)
Finished goods, June 1
Cost goods manufactured
Total cost of goods available
Finished goods, June 30
Recovery from Inventory write-down
Cost of goods sold

15.

P 290,540
805,820
1,096,360
( 276,760)
( 10,720)
P 808,880

(a)
Cost
NRV (P134,315 - P26,855)
Inventory write-down

16.

P 110,492
107,460
P
3,032

(a)
Balance of Allow. for Inventory Write-down
Required balance of Allow account:
Cost of inventory
NVV
Recovery

8,930

5,119
3,811

P296,369
291,250

5
Solutions to Problems
Problem 4-1
FIFO
DATE
Jan. 1
6

REF.
Bal.
PO74

12

R18

14

PO83

17

R23

31

R19

UNITS
200

250

RECEIVED
PRICE AMOUNT
40.50

41.00

UNITS

ISSUED
PRICE

AMOUNT

8,100
150
75

40.00)
40.50)

125
75
40

40.50)
41.00)
41.00

9,037.50

10,250
8,137.50
1,640

UNITS
150
150
200

BALANCE
PRICE AMOUNT
40.00
P 6,000.00
40.00)
40.50)
14,100.00

125
125
250

40.50
40.50)
41.00)

5,062.50
15,312.50

175
135

41.00
41.00

7,175.00
5.535.00

LIFO
DATE
Jan. 1

REF.
Bal.

6
12

R18

14

PO83

17
31

UNITS

RECEIVED
PRICE AMOUNT

UNITS

ISSUED
PRICE

AMOUNT

200
25

40.50)
40.00)

9,100.00

R23

200

41.00

8,200.00

R19

40

41.00

1,640

250

41.00

10,250

UNITS
150
150
200
125
125
250
125
50
125
10

BALANCE
PRICE AMOUNT
40.00
P 6,000.00
40.00
40.50
14,100.00
40.00
40.00)
41.00)
40.00)
41.00)
40.00)
41.00)

5,000.00
15,525.00
7,050.00
5,410

MOVING AVERAGE
DATE
Jan. 1
6

REF.
Bal.
PO74

UNITS
200

RECEIVED
PRICE AMOUNT
40.50

UNITS

ISSUED
PRICE

UNITS
150
350

9,067.50

125

40.30

5,037.50

375

40.80

15,282.50

8,100
225

12

R18

14

PO83

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

250

41.00

40.30

BALANCE
PRICE AMOUNT
40.00
P 6,000.00
40.30
14,105.00

AMOUNT

10,250

Problem 4-2
LOWER OF COST OR NRV BY ITEM
MATERIAL
X-1
X-2
X-3
A-4
A-5
A-6
Inventory

QUANTITY
100
200
120
120
110
25

COST
PER UNIT
P100.00
150.00
160.00
50.00
75.00
60.00

NRV PER
UNIT
P110.00
130.00
150.00
45.00
72.50
63.00

VALUATION
BASIS
Cost
NRV
NRV
NRV
NRV
Cost

valuation

LOWER OF
COST OR NRV
P10,000.00
26,000.00
18,000.00
5,400.00
7,975.00
1,500
P68,875.00

LOWER OF TOTAL COST OR TOTAL NRV

MATERIAL
X-1
X-2
X-3
A-4
A-5
A-6
Total
Inventory

MATERIAL
X-1
X-2
X-3
Total Group I
A-4
A-5
A-6
Total Group II

QUANTITY
100
200
120
120
110
25

COST
PER UNIT
P100.00
150.00
160.00
50.00
75.00
60.00

NRV PER
UNIT
P110.00
130.00
150.00
45.00
72.50
63.00

TOTAL
COST
P10,000.00
30,000.00
19,200.00
6,000.00
8,250.00
1,500.00

TOTAL
NRV
P11,000.00
26,000.00
18,000.00
5,400.00
7,975.00
1,575.00

P74,950.00

P69,950.00
P69,950.00

Valuation
LOWER OF TOTAL COST OR TOTAL NRV BY GROUP
COST
NRV PER
TOTAL
QUANTIT PER UNIT
UNIT
COST
Y
100
P100.00
P110.00
P10,000.00
200
150.00
130.00
30,000.00
120
160.00
150.00
19,200.00
P59,200.00
120
50.00
45.00
6,000.00
110
75.00
72.50
8,250.00
25
60.00
63.00
1,500.00
P15,750.00

Summary of Inventory Valuation:

MATERIAL
Group I
Group II
Inventory valuation

BASIS
Market
Market

VALUATION
P55,000.00
14,950.00
P69,950.00

TOTAL
NRV
P11,000.00
26,000.00
18,000.00
P55,000.00
5,400.00
7,975.00
1,575.00
P14,950.00

7
Problem 4-3
FIFO METHOD
Material A-42
DATE
May 1
2
3

REF.
Bal.
R032
PO507

RECEIVED
UNITS PRICE AMOUNT
650

10.20

ISSUED
PRICE

AMOUNT

110

9.50

1,045.00

UNITS

6,630

R036

150

9.50

1,425.00

31

R082

11
199

9.50)
10.20)

2,134.30

UNITS
271
161
161
650
11
650
451

BALANCE
PRICE AMOUNT
P9.50
P2,574.50
9.50
1,529.50
9.50)
10.20)
8,159.50
9.50)
10.20)
6,734.50
10.20

4,600.20

FIFO METHOD
Materials B-18
DATE
May 1
3
6

REF.
Bal.
PO507

RECEIVED
UNITS PRICE AMOUNT
650

6.50

R046
PO061

31

R082

650

5.90

AMOUNT

83
92
80

7.00)
6.50)
6.50

1,179.00
520.00

382

6.50

2,483.00

4,225.00

R034

12
26

ISSUED
PRICE

UNITS

3,835.00

UNITS
83
83
650
558
478
478
650
96
650

BALANCE
PRICE AMOUNT
P7.00 P 581.00
7.00)
6.50) 4,806.00
6.50
6.50
6.50)
5.90)
6.50)
5.90)

3,627.00
3,107.00
6,942.00
4,459.00

8
Problem 4-3 (continued)

MOVING AVERAGE METHOD

Material A-42
RECEIVED
UNITS PRICE AMOUNT

UNITS

ISSUED
PRICE

AMOUNT

UNITS
271

110

9.50

1,045.00

161

9.50

1,529.50

811

10.06

8,159.50

661

10.06

6,650.50

451

10.06

4,537.90

DATE
May 1

REF.
Bal.

R032

PO507

R036

150

10.06

31

R082

210

10.06

650

10.20

6,630.00
1,509.00
2,112.60

BALANCE
PRICE AMOUNT
P9.50
P2,574.50

MOVING AVERAGE METHOD

Materials B-18
DATE
May 1

REF.
Bal.

RECEIVED
UNITS PRICE AMOUNT
650

ISSUED
PRICE

PO507

R034

175

6.56

12

R046

80

26
31

PO061
R082

382

650

6.50

UNITS

5.90

AMOUNT

4,225.00

UNITS
83

BALANCE
PRICE AMOUNT
P7.00
P 581.00

733

6.56

4,806.00

1,148.00

558

6.56

3,658.00

6.56

524.80

478

6.56

3,133.20

6.18

2,360.80

1,128
746

6.18
6.18

6,968.20
4,607.40

3,835.00

Problem 4-4
Req 1:

Req. 2:

Req. 3:

Loss on inventory write-down

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

2,910

Allowance for inventory write-down

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

41,925

Allowance for inventory write-down

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

61,980

2,910

41,925

61,980

Problem 4-5
Req. 1:

No entry is needed, cost is lower than market.

Req. 2:

Loss on inventory write-down

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

6,350

Allowance for inventory write-down

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

6,350

Req. 3:

Req. 4:

2008: Inventory, at cost, Lower of cost or NRV

2009: Inventory, at cost
Less Allowance for inventory
Write-down
2010: Inventory, at cost, lower of cost or NRV

6,350

6,350

P365,900
P348,105
6,350

P341,755
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
Sales returns and allowances
Net sales
Cost of goods sold:
Finished goods inventory, Feb. 1
Cost of goods manufactured
Cost goods available
Finished goods inventory, Jan 31
Total
Loss on inventory write-down
Gross profit
Operating expenses
Selling expenses
Administrative expenses
Net income before provision for income tax
Provision for income tax
Net income after income tax

P729,370
48,211
681,159
P 47,910
422,280
470,190
49,620
420,570
9,682

430,252
250,907

96,357
60,061

156,418
94,489
28,347
P 66,141

Problem 4-7
FIFO METHOD
DATE
Mar. 1
5
9

REF.
Bal
R091
PO016

13

R094

22

PO023

29

R098

RECEIVED
UNITS PRICE AMOUNT
600

600

140

145

ISSUED
PRICE

AMOUNT

400

125

50,000

600
250

125)
140)

110,000

250

140

35,000

UNITS

84,000

UNITS
1,000
600
600
600
350
350
600
100

87,000

BALANCE
PRICE AMOUNT
125
125,000
125
75,000
125)
140)
159,000
140
140)
145)
140)
145)

49,000
136,000
101,000

MOVING AVERAGE METHOD

DATE
Mar 1
5

REF.
Bal
R091

Po016

13

R094

22

PO023

31

R098

RECEIVED
UNITS PRICE AMOUNT

UNITS
125

600

140

145

AMOUNT

125

50,000

84,000
850

600

ISSUED
PRICE

132.50

UNITS
1,000
600
1,200

132.50

159,000

350

132.50

46,375

950

140.40

133,375

140.40

98,275

112,625

87,000
250

140.40

35,100

BALANCE
PRICE AMOUNT
125.00
125,000
125.00
75,000

700

11
Problem 4-8

FIFO METHOD
Material
Number

Plywood
B-84

DATE
Nov. 1
1
3

REF.
Bal
R71
PO42

R36

12
21
26

R76
R76
PO47

31

R82

UNITS
650

650

Reorder Point
300
Reorder Quantity 650
RECEIVED
PRICE AMOUNT
88

UNITS

ISSUED
PRICE

AMOUNT

135

95

12,825

136
29
80
304

95)
88)
88
88

15,472
7,040
26,752

210

88

18,480

57,200

85

55,250

UNITS
271
136
136
650

BALANCE
PRICE AMOUNT
P95
P25,745
95
12,920
95)
88)
70,120

621
541
237
237
650
27
650

88
88
88
88)
85)
88)
85)

54,648
47,608
20,856
76,106
57,626

FIFO METHOD
Materials
Number
DATE
Nov. 1
3
4

Plastic
R-36

REF.
Bal
PO42

UNITS
650

Reorder Point
300
Reorder Quantity 650
RECEIVED
PRICE AMOUNT
76

R74
R76
PO47

31

R82

650

79

ISSUED
PRICE

83
52
165
80

70)
76)
76)
76)

353
30

76)
79)

BALANCE
PRICE AMOUNT
70
P5,810
70)
76)
55,210

AMOUNT

UNITS
83
83
650

9,762

598
433
353
353
650

76
76
76
76)
79)

45,448
32,908
26,828

620

79

48,980

49,400

R73

7
12
26

UNITS

6,080

51,350
29,198

78,178

12
Problem 4-8 (continued)

MOVING AVERAGE METHOD

Material
Number

Plywood
B-84

UNITS

Reorder Point
300
Reorder Quantity 650
RECEIVED
PRICE AMOUNT

UNITS

ISSUED
PRICE

AMOUNT

UNITS
271

135

95

12,875

136

95

12,920

786

89.2

70,120

14,718

621

89.2

55,402

89.20

7,136

541

89.2

48,266

89.20

27,117

237

89.2

21,149

887

86.1

76,399

677

86.1

58,318

DATE
Nov. 1

REF.
Bal

R71

PO42

R74

165

89.20

12

R76

80

21

R79

304

26

PO47

31

R82

650

650

88

57,200

85

55,250
210

86.1

18,081

BALANCE
PRICE AMOUNT
P95
P25,745

MOVING AVERAGE METHOD

Materials
Number

Plastic
R-36

Reorder Point
300
Reorder Quantity 650
RECEIVED
PRICE AMOUNT

REF.
Bal

UNITS

PO42

650

R73

135

75.32

R74

165

12

R76

80

26

PO47

31

R82

650

76

79

UNITS

ISSUED
PRICE

DATE
Nov. 1

AMOUNT

49,400

BALANCE
PRICE AMOUNT
70
P5,810

733

75.32

55,210

10,168

598

75.32

45,042

75.32

12,438

433

75.32

32,604

75.32

6,026

353

75.32

26,578

1003

77.70

77,928

620

77.70

48,168

51,350
383

UNITS
83

77.70

29,759

13
Problem 4-9
(1)

December 31, 2009:

Material
AB

Units
10,000
5,000
15,000

XY
14,500
Inventory valuation (FIFO)
(2)

P25

Total Cost
P 600,000
250,000
P 850,000
362,500
P1,212,500

December 31, 2010:

Material
Units
AB
16,000
XY
20,000
Inventory valuation (FIFO)

(3)

Unit Cost
P60
50

Unit Cost
P80
35

Total Cost
P1,280,000
700,000
P1,980,000

Total Cost
P 850,000
210,000
900,000
1,600,000
P2,750,000

December 31, 2010:

Material AB
Beginning inventory
Purchases, Feb.
Purchases, May
Purchases, Oct.
Total

Units
15,000
3,000
12,000
20,000
50,000

Unit Cost

Material XY
Beginning inventory
Purchases, Feb.
Purchases, Dec.
Total

Units
14,500
35,000
30,500
80,000

Unit Cost

P70
75
80

P30
35

Total Cost
P 362,500
1,050,000
1,067,500
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
Units sold (P2,800 / 100)
Ending inventory
FIFO:

42,000
28,000
14,000

September 5
25
Total

Units
2,000
12,000
14,000

Unit Cost
P43.00
42.50

Total Cost
P 86,000
510,000
P596,000

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

14,000

41.75

584,500

AVERAGE
P1,753,500
584,500
P1,169,000
(Sch. 1)

Available for sale

Less ending inventory
Cost of sales

FIFO
P1,753,500
596,000
P1,157,500
(Sch. 2)

Problem 4-11
2008
Cost of sales Average
Understatement of ending inventory:
2008
2009
2010
Cost of sales FIFO

2009
2010
P1,500,000
P2,000,000
P2,400,000
(150,000)

150,000
(200,000)
P1,950,000

200,000
(270,000)
P2,330,000

2008
P3,000,000
1,350,000
1,650,000
800,000
P 850,000

2009
P4,000,000
1,950,000
2,050,000
900,000
P1,150,000

2010
P4,800,000
2,330,000
2,470,000
1,000,000
P1,470,000

P 700,000

P1,100,000

P1,400,000

150,000

(150,000)
200,000

P1,350,000

Shang Company
Income Statement FIFO
Years Ended December 31, 2008, 2009 and 2010
Sales
Cost of sales FIFO
Gross profit
Operating expenses
Net income
Proof:
Net income AVERAGE
Understatement of ending inventory:
2008
2009
2010
Net income FIFO

P 850,000

P1,150,000

(200,000)
270,000
P1,470,000

15
Problem 4-12

Inventory
Units
Unit Cost
Materials:
R-10
1,000
P110
S-11
2,000
250
T-12
3,000
300
Goods in Process:
X-20
4,000
500
Y-21
5,000
650
Finished Goods:
A-30
2,000
800
B-31
2,000
730
Ending inventory at lower of cost or NRV

NRV per unit

Valuation at
Lower of Cost
or NRV

P100
260
330

P 100,000
500,000
900,000

480
620

1,920,000
3,100,000

790
780

1,580,000
1,460,000
P9,560,000

Problem 4-13

Materials
Units
Unit Cost
AA
1,000
P120
BB
1,500
110
CC
1,200
150
DD
1,800
140
EE
1,700
130
Ending inventory at lower of cost or NRV

NRV per Unit

P150
120
140
160
160

Valuation at
Lower of Cost
or NRV
P120,000
165,000
168,000
252,000
221,000
P926,000

Problem 4-14

Product
A-1
B-2
C-3
D-4

Units
700
495
255
450

Unit Cost
P700
475
255
450

NRV per unit

P650
745
250
740

Valuation at
Lower of Cost
or NRV
P650
475
250
450