Problem 31-1 (IAA)

ABC Company provided the following inventory data at December

31, 2016:
Cost NRV
Skis 11,000,000 12, 500,000
Boots 8,500,000 7,500,000
Ski equipment 3,500,000 4,000,000
Ski apparel 2,000,000 2,500,000

What amount should be reported as inventory at December 31,

2016?
a. 25,000,000
b. 26,500,000
c. 24,000,000
d. 26,000,000

Problem 31-2 (AICPA Adapted)

ABC Company provided the following information for an inventory
at December 31, 2016:
Historical cost 6,000,000
Estimated selling price 6,500,000
Estimated completion and selling cost 750,000
Replacement cost 5,500,000

What amount should be reported as inventory at December 31,

2016?
a. 5,500,000
b. 5,750,000
c. 6,000,000
d. 6,500,000

Problem 31-3 (AICPA Adapted)

ABC Company determined the following information for an
inventory at December 31,2016:
Historical Cost 10,000,000
Current replacement cost 7,000,000
Net realizable value 9,000,000
Net realizable value less a normal profit margin 8,500,000
Fair value 9,500,000

What amount should be reported as inventory at December 31,

2016?
a. 7,000,000
b. 8,500,000
c. 9,000,000
d. 9,500,000

Problem 31-4 (IFRS)

ABC Company has two products in the inventory.
Product X Product Y
Selling price 10,000,000 15,000,000
Materials and conversion costs 7,500,000 9,000,000
General administration costs 1,500,000 4,000,000
Estimated selling costs 3,000,000 3,500,000

At December 31, 2016, the manufacture of items of inventory has

been completed but no selling costs have yet been incurred.

What is the measurement of the inventory at December 31, 2016?

a. 18,500,000
b. 16,000,000
c. 19,000,000
d. 16,500,000

Problem 31-5 (AICPA Adapted)

Based on a physical inventory taken at December 31, 2016, ABC
Company determined the chocolate inventory on a FIFO basis at
P26,000,000 with a replacement cost of P20,000,000.
The entity estimated that, after further processing costs of
P12,000,000, the chocolate could be sold as finished candy bars
for P40,000,000. The normal profit margin is 10% of sales.
Using the measurement at the lower of cost and net realizable
value, what amount should be reported as chocolate inventory at
December 31, 2016?
a. 28,000,000
b. 20,000,000
c. 26,000,000
d. 24,000,000

Problem 31-6 (IAA)

ABC Company provided the following data for the current year:
Inventory - January 1:
Cost 15,000,000
Net realizable value 14,000,000
Net purchases 40,000,000
Inventory - December 31, 2016:
Cost 20,000,000
Net Realizable Value 18,500,000

What amount should be reported as cost of goods sold?

a. 35,000,000
b. 35,500,000
c. 36,500,000
d. 36,000,000

Problem 31-7 (IAA)

ABC Company used the lower of cost or net realizable value
method to value inventory.
Data regarding the items in work in process inventory are
presented below:
Markers Pens Highlighters
Historical cost 1,200,000 940,000 1,500,000
Selling price 1,800,000 1,250,000 1,800,000
Estimated cost to complete 240,000 250,000 340,000
Replacement cost 1,040,000 840,000 1,590,000
Normal profit margin as a
percentage of selling price 25% 25% 10%

What is the measurement of the work in process inventory?

a. 3,600,000
b. 3,640,000
c. 3,380,000
d. 3,470,000

Problem 31-8 (IAA)

At December 31, 2016, ABC Company reported ending inventory at
P15,000,000, and the allowance for inventory writedown before
any adjustment at P750,000.
Product 1 Product 2 Product 2 Product 3
Historical cost 4,000,000 5,000,000 3,500,000 2,500,000
Replacement cost 4,500,000 6,000,000 5,000,000 3,000,000
Sales price 6,000,000 6,500,000 6,250,000 5,000,000
Net realizable
Value 2,750,000 5,500,000 4,750,000 1,750,000
Normal profit 1,250,000 750,000 1,500,000 1,500,000

What amount of loss on inventory writedown should be included

in cost of goods sold?
a. 500,000
b. 1,000,000
c. 2,000,000
d. 1,250,000

Problem 31-9 (IAA)

ABC Company carried four items in inventory. The following per-
unit data relate to these items at the end of first year of
operations:
Units Cost Sales Price Selling cost Normal profit
Category 1:
A 25,000 525 650 75 100
B 20,000 425 450 50 50
Category 2:
C 40,000 250 225 25 25
D 30,000 325 375 75 50

1. What is the measurement of inventory under LCNRV applied to

individual item?
a. 38,125,000
b. 41,375,000
c. 38,625,000
d. 39,375,000

2. What is the measurement of inventory under LCNRV applied to

inventory category?
a. 39,375,000
b. 38,625,000
c. 41,375,000
d. 38,125,000

3. What is the measurement of inventory under LCNRV applied to

inventory as a whole?
a. 41,375,000
b. 38,125,000
c. 39,375,000
d. 38,625,000

Problem 31-10 (IFRS)

ABC Company used the perpetual method to record inventory
transactions for 2016.
Inventory 9,500,000
Sales 32,500,000
Sales return 750,000
Cost of goods sold 23,000,000
Inventory losses 600,000

On December 24, 2016, the entity recorded a P750,000 credit sale

of goods costing P500,000.
These goods were sold on FOB destination terms and were in
transit on December 31, 2016. The good were included in physical
count.
The inventory on December 31,2016 determined by physical count
had a cost of P10,000,000 and a net realizable value of
P8,500,000. Any inventory writedown is not yet recorded.
What amount should be reported as cost of goods sold for 2016?
a. 25,100,000
b. 22,500,000
c. 23,600,000
d. 24,600,000

Problem 31-11 (AICPA Adapted)

ABC Company reported the following information for the current
year:
Sales (100,000 units at P750) 75,000,000
Sales discount 5,000,000
Purchases 46,500,000
Purchase discount 2,000,000

The inventory purchases during the year were as follows:

Units Unit cost Total cost
Beginning inventory, January 1 20,000 300 6,000,000
Purchases, quarter ended March 31 30,000 325 9,750,000
Purchases, quarter ended June 30 40,000 350 14,000,000
Purchases, quarter ended Sept.30 50,000 375 18,750,000
Purchases, quarter ended Dec. 31 10,000 400 4,000,000
 150,000 10,500,000
The accounting policy is to report the inventory in the
financial statements at the lower of cost and net realizable
value.
Cost is determined that the replacement cost of inventory P350
per unit and the net realizable value was P360 per unit. The
normal profit margin is P10 per unit.
What amount should be reported as cost of goods sold for the
current year?
a. 32,500,000
b. 31,500,000
c. 33,500,000
d. 34,500,000

Problem 31-12 (IAA)

In 2015, ABC Company experienced a decline in the value of
inventory resulting in a writedown from cost of P18,000,000 to
net realizable value of P15,000,000.
The entity used the allowance method to record the necessary
adjustment.
In 2016, market conditions have improved dramatically. On
December 31,2016, the inventory had a cost of P25,000,000 and
net realizable value of P23,000,000.
What is included in the adjusting entry on December 31, 2016?
A. Debit gain on reversal of inventory writedown P1,000,000
B. Credit gain on reversal of inventory writedown P2,000,000
C. Debit allowance for inventory writedown P1,000,000
D. Credit allowance for inventory writedown P2,000,000

Problem 31-13 (AICPA Adapted)

On December 31, 2015, ABC Company has outstanding purchase
commitments for 50,000 gallons at P20 per gallon of raw
material.
It is determined that the market price of the raw material has
declined to P17 per gallon on December 31, 2015 and is expected
to decline further to P15 in the first quarter of 2016.
What is the loss on purchase commitment that should be
recognized in 2015?
a. 4,250,000
b. 750,000
c. 1,250,000
d. 0

Problem 31-14 (IAA)

On October 1, 2015, ABC Company entered into a 6-month,
P26,000,000 purchase commitment or a supply of a special
product. On December 31, 2015, the market value of this material
had fallen to P25,000,000
On March 31,2016, the market value of the purchase commitment
is P24,500,000.
What is the loss on purchase commitment to be recognized March
31, 2016?
a. 1,000,000
b. 500,000
c. 1,500,000
d. 0

Problem 31-15 (IAA)

On November 15,2015, ABC Company entered into a commitment to
purchase 10,000 ounces of gold on February 15,2016 at a price
of P1,550 per ounce. On December 31, 2015, the market price of
gold is P1,350 per ounce. On February 15,2016, the price of gold
is P1,500 per ounce.
1. What is the loss on purchase commitment to be recognized on
December 31,2015?
a. 2,000,000
b. 500,000
c. 1,500,000
d. 0
2. What is the gain on purchase commitment to be recognized on
February 15, 2015?
a. 2,000,000
b. 1,500,000
c. 500,000
d. 0
3. What amount should be debited to purchases on February 15,
2016?
a. 15,000,000
b. 15,500,000
c. 13,500,000
d. 17,500,000
4. What amount should be recognized as accounts payable on
February 15, 2016?
a. 13,500,000
b. 15,500,000
c. 17,500,000
d. 15,000,000

Problem 31-16 (IAA)

On November 15, 2015, ABC Company entered into a commitment to
purchase 100,000 barrels of aviation fuel for P275 per barrel
on March 31, 2016. The entity entered into this purchase
commitment to protect itself against the volatility in aviation
fuel market. By December 31, 2016, the purchase price of
aviation fuel had fallen to P200 per barrel. However, by March
31, 2016, when the entity took delivery of the 100,000 barrels,
the price of aviation fuel had risen to P300 per barrel.
1. What amount should be recognized as gain on purchase
commitment for 2016?
a. 7,500,000
b. 10,000,000
c. 2,500,000
d. 0
2. What amount should be debited to purchases on March 31, 2016?
a. 25,000,000
b. 25,500,000
c. 20,000,000
d. 30,000,000
Problem 31-17 (AICPA Adapted)
On January 1, 2016, ABC Company signed a three-year,
noncancelable purchase contract, which allows ABC to purchase
up to 5,000 units of a computer part annually from DEF Company
at P500 per unit and guarantees a minimum annual purchase of
1,000 units. During 2016, the part unexpectedly became obsolete.
ABC had 2,500 units of this inventory on December 31, 2016, and
believed these parts can be sold as scrap for P100 per unit.
1. What amount of loss from the purchase commitment should be
reported in the 2016 income statement?
a. 1,200,000
b. 1,000,000
c. 800,000
d. 1,800,000
2. What amount should be recognized as loss on inventory
writedown in 2016?
a. 1,800,000
b. 2,800,000
c. 1,000,000
d. 0