Reference no: EM132953147

PROBLEM 1 - Presented below is a list of items that may or may not be reported as inventory in a company's December 31 statement of financial position:

Goods out on consignment at another company's store P 800,000

Goods sold on installment basis 100,000

Goods purchased FOB shipping point that are in transit at December 31 120,000

Goods purchased FOB destination, received December 31 200,000

Goods sold FOB shipping point that are in transit at December 31 120,000

Freight charges on goods sold 80,000

Factory labor costs incurred on goods still unsold 50,000

Interest cost incurred for inventories that are routinely manufactured 40,000

Costs incurred to advertise goods held for resale 20,000

Materials on hand not yet placed into production 350,000

Office supplies 10,000

Raw materials on which the company has started production, but which are not completely processed 280,000

Factory supplies 20,000

Goods held on consignment from another company 450,000

Costs identified with units completed but not yet sold 260,000

Goods sold FOB destination that are in transit at December 31 40,000

Required - How much of these items would typically be reported as inventory in the financial statements?

PROBLEM 2 - On November 17, 2019, LL Co. entered into a non-cancelable commitment to purchase 3,000 barrels of aviation fuel for P9,000,000 on March 31, 2020. LL entered into this purchase commitment to protect itself against the volatility in the aviation fuel market. By December 31, 2019, the purchase price of aviation fuel had fallen to P2,200 per barrel. However, by March 31, 2020, when LL took delivery of the 3,000 barrels, the price of aviation fuel had risen to P3,100 per barrel. Based on the above information, compute for:

a) Loss on purchase commitment on December 31, 2019.

b) Gain on purchase commitment (if there is any) on March 31, 2020.