FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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In an audit of Ingenious Company for the year ended December 31, 2013, the entity took its annual physical inventory on November 30, 2013, the entity's inventory which includes raw material and work in process is on a perpetual basis and FIFO pricing is used. There are no finished goods. The physical inventory on November 30, 2013 revealed that the book inventory of P6,057,00 was understated by P300,00. To avoid distorting the interim financial statements, the entity decided not to adjust the book inventory until year-end except for obsolete items. Data pertaining to the November 30, 2013 inventory are:
A. Pricing test showed that the physical inventory was onverstated by P220,000
B. footing and extension errors resulted in a P15,000 understatement of physical inventory.
C. Direct labor included in the physical inventory amounted to P1,000,000.
D. The physical inventory included obsolete materials recorded at P25,000 During December these obsolete materials were removed from inventory account by a charge to cost of salse.
Dataa pertaining to the December 31, 2013 inventory are:
A. total debits during December are P2,470,000 for purchases, P1,210,000 for direct labor. P2,520,000 for manufacturing overhead expense, and P6,860,00 for cost of sales.
B. the cost of sales of P6,860,00 included direct labor of P1,380,000
C. A special order started and completed December has excessive scarp loss of P80,000 which was charged to fracturing overhead expenses
Required:
1. Determine the correct amount of physical inventory on November 30, 2013
2. If the Physical inventory on November 30, 2013 was P5,770,000 determine the correct inventory on December 31, 2013.
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