PROBLEM 11-11

Landmark Company purchased a tract of unimproved land for P26,850,000. The land was
improved and subdivided into residential lots at a cost of P43,500,000.

The residential lots were all of the same size but owing to differences in location were offered
for sale at different prices.

Class 1 No. of lots Sales price per lot

1 20 3,000,000
2 10 2,500,000
3 10 2,000,000

Lots unsold at the end of the year are:

Class 1 5 lots
Class 2 4 lots
Class 3 3 lots

Required:
Compute the cost of unsold lots at the end of the year.

Solution

Purchase price 26,550,000

Improving and subdividing cost 43,500,000
Total cost 70,350,000

Sales price Fraction Cost

Group
1 (20 x 3,000,000) 60,000,000 60/105 40,200,000
2 (10 x 2,500,000) 25,000,000 25/105 16,750,000
3 (10 x 2,000,000) 20,000,000 20/105 13,400,000
105,000,000 70,350,000

Cost per lot Unsold Cost

Group
1 (40,200,000/20) 2,010,000 5 10,050,000
2 (16,750,000/10) 1,675,000 4 6,700,000
3 (13,400,000/10) 1,340,000 3 4,020,000
20,770,000

PROBLEM 11-12

Solid Company purchased a plot of ground for P18,000,000. The entity also paid an independent
appraiser for the land the amount of P500,000.

The land was developed as residential lots at a total cost of P41,500,000. The lots were classified
into three:
 Number of lots Sales price per lot
Highland 20 1,000,000
Midland 40 750,000
Lowland 100 500,000

Required:
Compute the total cost of each qualification.

Solution:

Sales price Fraction Total cost

Highland (20 x 1,000,000) 20,000,000 20/100 12,000,000
Midland (40 x 750,000) 30,000,000 30/100 18,000,000
Lowland (100 x 500,000) 50,000,000 50/100 30,000,000
100,000,000 60,000,000

PROBLEM 11-13

Marsh company had 150,000 units of product A on hand at January 1, costing P21 each.
Purchases of product A during the month of January were as follows:

January Units Unit cost

10 200,000 22
18 250,000 23
28 100,000 24

A physical count on January 31 shows 250,000 units of product A on hand. What is the cost of the
inventory on January 31 under the FIFO method?

a. 5,850,000
b. 5,550,000
c. 5,350,000
d. 5,250,000

Solution:

January Units Unit cost Total cost

18 150,000 23 3,450,000
28 100,000 24 2,400,000
Total FIFO cost 250,000 5,850,000
PROBLEM 11-14

The following information has been extracted from the records of Jayson Company about one of
its products. Jayson Company uses the perpetual system.
Units Unit cost Total
cost
Jan. 1 Beginning balance 8,000 70.00 560,0006
Purchase 3,000 70.50 211,500
Feb. 5 Sale 10,000
Mar. 5 Purchase 11,000 73.50 808,500
Mar. 8 Purchase return 800 73.50 58,000
Apr. 10 Sale 7,000
Apr. 30 Sale return 300

If the FIFO cost flow method is used, what is the cost of the inventory on April 30?

a. 330,750
b. 315,000
c. 433,876
d. 329,360

Solution:

From March 5 purchase (4,500 units x 73.50) 330,750

Whether periodic or perpetual system, the FIFO inventory is the same.

PROBLEM 11-15

During January of the current year, Metro Company which maintains a perpetual inventory
system, recorded the following information pertaining to its inventory:

Units Unit cost Total cost Unit on hand

Balance on 1/1 10,000 100 1,000,000 10,000
Purchased on 1/7 6,000 300 1,000,000 16,000
Sold on 1/20 9,000 7,000
Purchased 1/25 4,000 500 2,000,000 11,000

1. Under the moving average method, what amount should Metro report as inventory on January 31?

a. 2,640,000
b. 3,225,000
c. 3,300,000
d. 3,900,000

2. Under the FIFO method, what amount should Metro report as inventory on January 31?
 a. 1,300,000
b. 2,700,000
c. 3,900,000
d. 4,100,000

Solution:
Units Unit cost Total cost
January 1 10,000 100 1,000,000
January 7 6,000 300 1,800,000
Balance (2,800,000/16,000) 16,000 175 2,800,000
January 20 sale (9,000) 175 (1,575,000)
Balance 7,000 175 1,225,000
January 25 4,000 500 2,000,000
Balance (3,225,000/11,000) 11,000 293 3,225,000

Units Unit cost Total cost

January 1 1,000 100 100,000
January 7 6,000 300 1,800,000
January 25 4,000 500 2,000,000
Total FIFO cost 11,000 3,900,000

PROBLEM 11-16

Frey Company recorded the following data pertaining to raw material Y during January of the
current year.
Units
Date Received Cost Issued On hand
1/1 Inventory 200 8,000
1/8 Issue 4,000 4,000
1/20 Purchase 12,000 200 16,000

What amount should be reported as cost of the inventory on January 31 using moving average?

a. 3,520,000
b. 3,584,000
c. 3,680,000
d. 3,840,000

Solution:

January Unit Unit cost Total cost

1 8,000 200 1,600,000
8 (4,000) 200 (800,000)
4,000 200 800,000
20 12,000 240 2,880,000
(3,680,000/16,000 = 230) 16,000 230 3,680,000

PROBLEM 11-17

Massive Company provided the following information:

Units Unit cost Total cost

January 1 Inventory on hand 200 1,500 300,000
April 3 Purchase 300 1,750 525,000
October 1 Purchase 500 2,000 1,000,000

The entity sold 400 units on June 25 and 400 on December 10. What amount should be recorded as
weighted average cost of the inventory at year-end?

a. 350,000
b. 400,000
c. 730,000
d. 365,000

Solution:

Sales Units Ending inventory

June 25 400 1,000
December 10 400 (800)
800 200

Weighted average unit cost (1,825,000/1,000) 1,825

Inventory cost (200x1,825) 365,000

PROBLEM 11-18

Jailbird Company provided the following data about the inventory for the month of January:

Units Unit cost Total cost

January
1 Beginning 16,000 140 2,240,000
5 Purchase 4,000 150 600,000
10 Sales 15,000
15 Purchase 20,000 160 3,200,000
16 Purchase return 1,000 160 160,000
25 Sale 8,000
26 Sale return 4,000
31 Purchase 30,000 150 4,500,000

What amount should be recorded as moving average cost of the inventory on January 31?

a. 7,625,000
 b. 7,500,000
c. 7,690,000
d. 7,530,000

Solution:

Date Units Unit cost Total cost

January
1 Beg. Balance 16,000 140 2,240,000
5 Purchase 4,000 150 600,000
Balance 20,000 142 2,840,000
10 Sale (15,000) 142 2,130,000
Balance 5,000 142 710,000
15 Purchase 20,000 160 3,200,000
16 Purchase return (1,000) 160 (180,000)
Balance 24,000 156.25 3,750,000
20 Sale (8,000) 156.25 1,250,000
Balance 16,000 156.25 2,500,000
Sales return 4,000 156.25 625,000
Balance 20,000 156.25 3,125,000
Purchase 30,000 150 4,500,000
Balance 50,000 152.20 7,625,000

PROBLEM 11-19

Hilltop Company sells a new product. During a move to a new location. The inventory records
for the product were misplaced. The bookkeeper has been able to gather some information from the
purchase and sales records. The July purchases are as follows:

Quantity Unit cost Total

cost
July 5 10,000 65 650,000
9 12,000 63 756,000
12 15,000 60 900,000
25 14,000 62 868,000
51,000 3,174,000

On July 31, 15,000 units were on hand. The sales for July amount to P6,000,000, or 60,000 units at P100
per unit. Hilltop has always used a periodic FIFO inventory costing system. Gross profit on sales for July
was P2,400,000. What is the cost of inventory on July 1?

a. 1,354,000
b. 2,400,000
c. 2,826,000
d. 426,000

Sales 6,000,000
Gross Profit (2,400,000)
Cost of goods sold 3,600,000
Inventory – July 31 (see below) 928,000
Cost of goods available for sale 4,528,000
Purchase for July (3,174,000)
Inventory – July 1 1,354,000

Quantity Unit cost Total

cost
July 12 1,000 60 60,000
25 14,000 62 868,000
FIFO inventory – 7/31 15,000 928,000

PROBLEM 11-20

On July 1, Casa Company purchased a tract of land for P12, 000,000. Casa incurred additional
cost of P3,000 000 during the reminder of the year in preparing the land for sale. The tract was
subdivided into residential lost as follows:

Lot class Number of lots Sales price per lot

A 100 240,000
B 100 160,000
C 200 100,000

Using the relative sales value method, what amount of cost should be allocated to Class A lots?

a. 3,000,000
b. 3,750,000
c. 6,000,000
d. 7,200,000

Solution:

Sales price Fraction Allocated cost

A (100 x 240,000) 24,000,000 24/60 6,000,000
B (100 x 160,000) 16,000,000 16/60 4,000,000
C (200x 100,000) 20,000,000 20/60 5,000,000
60,000,000 15,000,000

Incidentally, the cost of each class A lot is P6, 000,000 divided by 100 lots of P60,000.