Reference no: EM133055396
Questions -
Q1. Henry Company manufactures and sells paper envelopes. The stock of envelopes was included in the closing inventory on December 31, 2021, at a cost of P50 per pack. During the final audit, the auditors noted that the subsequent sale price for the inventory at January 15, 2022 was P40 per pack. Furthermore, inquiry reveals that during the physical stock take, a water leakage has created damage to the paper and glue. Accordingly, in the following week, the entity has spent P15 per pack for repairing and reapplying glue to the envelopes. What is the net realizable value and loss on inventory writedown, respectively?
a. 35 and 15
b. 40 and 10
c. 25 and 25
d. 45 and 10
Q2. On December 31, 2021, a fire at Rudy Company's only warehouse caused severe damage to its entire inventory. Based on recent history, Rudy has a gross profit of 40% on cost. The following information is available from the records for the year ended December 31, 2021:
Inventory 1/1 2,000,000
Net purchases 7,000,000
Net sales 9,100,000
A physical inventory disclosed usable damaged goods which Rudy estimates can be sold to a jobber for P200,000. Using the gross profit method, the estimated cost of goods sold for the year ended December 31, 2021, should be
a. 5,600,000
b. 5,460,000
c. 6,500,000
d. 4,200,000
Q3. Pauline Company has a recent gross profit history of 40% of net sales. The following data are available from the accounting records for the three months ended March 31, 2021:
Inventory 1/1 650,000
Purchases 3,200,000
Net sales 4,500,000
Purchase returns 75,000
Freight in 50,000
Using the gross profit method, the estimated cost of goods sold for the three months ended March 31, 2021, should be
a. 3,825,000
b. 3,775,000
c. 1,800,000
d. 2,700,000