Inventories: D - PPE, E.g., Factory Equipment Used in The Production of Goods

Chapter 7
Inventories
QUIZ
1. For government entities, inventories are assets (choose the incorrect one)
a. Held for sale, consumption, distribution, or exchange.
b. In the process of production for sale, consumption, distribution or exchange.
c. In the form of materials or supplies to be consumed in the production process or in the
rendering of services.
d. Used in the production of goods.
D – PPE, e.g., factory equipment used in the production of goods.
2. Entity A, a government entity, purchases office supplies. Entity A would most likely record the
purchase
a. by debiting the Purchases account
b. as Inventory Held for Consumption
c. as Inventory Held for Distribution
d. by debiting the Office Supplies Expense account
3. Who owns the goods in transit under FOB shipping point?

a. buyer
b. seller
c. either a or b
d. none
4. Which of the following documents is prepared when issuing semi-expendable property to end-
users?
a. Requisition and Issue Slip (RIS)
b. Inventory Custodian Slip
c. Supplies Ledger Card (SLC)
d. Waste Materials Report
5. The carrying amount of inventory is not recognized as expense in this type of event or
transaction.
a. The inventory is sold.
b. The inventory is used in the production of another asset.
c. The inventory is consumed by end users in providing service.
d. The inventory is written-off.
6. Which of the following is subsequently measured at the lower of cost and current replacement
cost?
a. Inventories held for sale
b. Inventories held for distribution
c. Inventories that are undergoing manufacturing process for completion as finished goods for
sale.
d. None of these.
7. The supply or property office of a government entity uses this to record and monitor the
movements and balances of inventories.
a. Stock Card
b. Inventory Listing
c. Stock Ledger Card
d. Registry of Inventory
8. The following information is available from Entity A’s (a government entity) accounting records:
Purchases ............................................ ₱530,000
Purchase discounts ................................... 10,000
Beginning 160,000
inventory ..................................
Ending inventory ..................................... 215,000
Freight-out .......................................... 40,000
Entity A’s cost of sales is

a. 465,000
b. 475,000
c. 505,000
d. 585,000
A
Solution:
Inventory
beg. 160,000 10,000 Purchase Disc.
Purchase 465,00 COGS
s 530,000 0 (squeeze)
215,000 end.
9. Entity A, a government entity and a manufacturer of military equipment, had inventories at the
beginning and end of its current year as follows:
Beginnin
End
g
Raw materials 11,000 15,000
Work in
20,000 24,000
process
Finished goods 12,500 9,000
During the year, the following costs and expenses were incurred:
Raw materials purchased 150,000

Direct labor cost 60,000
Indirect factory labor 30,000
Taxes and depreciation on factory building 10,000
Taxes and depreciation on sales room and office 7,500
Sales salaries 20,000
Office salaries 12,000
Utilities (60% applicable to factory, 20% to sales room, and 20% to office) 25,000
Entity A's cost of sales for the year is

a. 257,000
b. 260,500
c. 261,000
d. 269,500
B
Solution:
Raw materials
beg. 11,000
Purchases 150,000 146,000 DM

15,000 end.
WIP
beg. 20,000
Direct materials 146,000
Direct labor 60,000
Factory overhead:
Indirect factory labor 30,000
Taxes and depn. - factory bldg. 10,000
Utilities (60% x 25,000) 15,000 257,000 COGM
24,000 end.
Finished goods
beg. 12,500
COGM 257,000 260,500 COGS

9,000 end.
10. Entity A, a government entity, is a wholesaler of Product A, a non-unique good. The activity for
Product A during July is shown below:
Balance/
Date Transaction Units Cost
July Inventory 2,000 ₱36.00
1
7 Purchase 3,000 37.00
12 Sales 3,600
21 Purchase 5,000 37.88
22 Sales 3,800
29 Purchase 1,600 38.11
How much is the ending inventory on July 31?

a. 153,400
b. 156,912
c. 158,736
d. Answer cannot be determined due to insufficient information
C
Solution:
Date Transaction Units Cost Total cost
1-
Inventory 2,000 36.00 72,000
Jul
7 Purchase 3,000 37.00 111,000
Total 5,000 36.60 183,000

12 Sales (3,600) (131,760)
36.60
21 Purchase 5,000 37.88 189,400
Total 6,400 37.60 240,640

22 Sales (3,800) (142,880)
37.60
29 Purchase 1,600 38.11 60,976
Ending

inventory 4,200 158,736
“So do not fear, for I am with you; do not be dismayed, for I am your God. I will strengthen you and help you;
I will uphold you with my righteous right hand.”
(Isaiah 41:10)
- END -

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Chapter 7

D – PPE, e.g., factory equipment used in the production of goods.

3. Who owns the goods in transit under FOB shipping point?

Entity A’s cost of sales is

Raw materials purchased 150,000

Entity A's cost of sales for the year is

Purchases 150,000 146,000 DM

Utilities (60% x 25,000) 15,000 257,000 COGM

COGM 257,000 260,500 COGS

How much is the ending inventory on July 31?

Total 5,000 36.60 183,000

Total 6,400 37.60 240,640

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