Scribd
Upload
112 views

Case 1: Balungao Company Engaged You To Examine Its Books and Records For The

1. The most likely gross profit rate to be used in estimating the inventory of goods in process destroyed by

Uploaded by

kat kale
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
112 views

Case 1: Balungao Company Engaged You To Examine Its Books and Records For The

1. The most likely gross profit rate to be used in estimating the inventory of goods in process destroyed by

Uploaded by

kat kale
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

Case 1: Balungao Company engaged you to examine its books and records for the

fiscal year ended June 30, 2018. The company’s accountant has furnished you not
only the copy of trial balance as of June 30, 2018 but also the copy of company’s
balance sheet and income statement as at said date. The following data appears in
the cost of goods sold section of the income statement:
Inventory, July 1, 2017 P 500,000
Add: Purchases 3,600,000
Total goods available for sale 700,000
Less: Inventory, June 30, 2018 4,100,000
Cost of goods sold P 3,400,000

The beginning and ending inventories of the year were ascertained thru physical
count except that no reconciling items were considered. Even though the books
have been closed, your working paper trial balance show all account with activity
during the year. All purchases are FOB shipping point. The company is on a
periodic inventory basis. In your examination of inventory cut-offs at the beginning
and end of the year, you took note of the following:

July 1, 2017
a. June invoices totaling to P130,000 were entered in the voucher register in
June. The corresponding goods not received until July.
b. Invoices totaling P54,000 were entered in the voucher register in July but
the goods received during June.

June 30, 2018


a. Invoices with an aggregate value of P186,000 were entered in the voucher
register in July, and the goods were received in July. The invoices, however,
were date June.
b. June invoices totaling P74,000 were entered in the voucher register in June
but the goods were not received until July.
c. Invoices totaling P108,000 (the corresponding goods for which were
received in June) were entered the voucher register, July.
d. Sales on account in the total amount of P176,000 were made on June 30
and the goods delivered at that time. Book entries relating to the sales were
made in June.

Requirements: Based on the above and the result of your cut-off tests, answer the
following:
1. How much is the adjusted Inventory as of July 1, 2017?
2. How much is the adjusted Purchases for the fiscal year ended June 30, 2018?
3. How much is the adjusted Inventory as of June 30, 2017?
4. How much is the adjusted Cost of Goods Sold for the fiscal year ended June 30,
2018?
5. The necessary compound adjusting journal entry as of June 30, 2018 would
include a net adjustment to Retained Earnings of ____.
Case 2: On March 31, 2018 San Fabian Company had a fire which completely
destroyed the factory building and inventory of goods in process; some of the
equipment was saved. After the fire, a physical inventory was taken. The material
was valued at P750,000 and the finished goods at P620,000.

The inventories on January 1, 2018 consisted of:


Materials P 310,000
Goods in process 1,215,000
Finished goods 1,700,000
Total P 3,225,000

A review of the accounting records disclosed that the sales and gross profit on sales
for the last three years were:
Sales Gross profit
2003 P8,000,000 P2,400,000
2004 7,600,000 2,215,000
2005 5,000,000 1,776,000

The sales for the first three months of 2018 were P3,000,000. Material purchases
were P1,250,000, transportation on purchases was P100,000 and direct labor cost
for the three months was P1,000,000. For the past two years, factory overhead
cost has been 80% of direct labor cost.

Requirements: Based on the above and the result of your audit, compute the
following:
1. The most likely gross profit rate to be used in estimating the inventory of goods
in process destroyed by fire
2. Total cost of goods placed in process
3. Total cost of goods manufactured
4. Inventory of goods in process lost

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy