Joanna Sales Company uses the first-in, first-out method in calculating cost of

goods sold for the three products that the company handles. Inventories and
purchase information concerning the three products are given for the month of
December.
Dec. 1

Inventory

Dec. 1-15

Purchases

Dec. 16-31 Purchases

Dec. 1-31

Sales

Dec. 31

Sales price

Product A
Product B
Product C
100,000 60,000 units 130,000 units
units at
at P10.00
at P0.90
P6.00
140,000 90,000 units 60,000 units
units at
at P10.50
at P1.25
P6.50
60,000 units
at P8.00
210,000 100,000 units 90,000 units
units
P8.00/unit
P11.00/unit
P2.00/unit

On December 31, the companys suppliers reduced their prices from the most
recent purchase prices by the following percentages: product A, 20%; product B,
10%; product C, 8%. Accordingly, Joanna decided to reduce its sales prices on all
items by 10%, effective November 1. Joannas selling cost is 10% of sales price.
Products A and B have a normal profit (after selling costs) of 30% on sales prices,
while the normal profit on product C (after selling cost) is 15% of sales price.
QUESTIONS:
Based on the above and the result of your audit, determine the following:
1. Total cost of Inventory at December 31 is
a. P1,130,000
b. P1,114,620
c. P1,311,000

d. P1,235,000

2. The amount of Inventory to be reported on the companys balance sheet at

December 31 is
a. P1,139,700
b. P1,118,700
c. P1,087,620
d. P1,190,700
3. The Allowance for inventory write down at December 31 is
a. P11,300
b. P171,300
c. P27,000
d. P120,300

4. The cost of sales, before loss on inventory writedown, for the month of
December is
a. P2,597,000
b. P2,044,520
c. P2,587,300
d. P2,416,000
5. If the perpetual inventory records show lower quantities of inventory that the
physical count an explanation of the difference might be unrecorded
a. Sales.
c. Purchases.
b. Purchase returns.
d. Purchase discounts.