PROBLEM 5: In connection with your audit of VVV Manufacturing Company, you reviewedits inventory as of December 31, 2020 and found the following items: A. A packing case containing a product costing P100,000 was standing in the shippingroom when the physical inventory was taken. It was not included in the inventorybecause it was marked “Hold for Shipping Instructions”. The customer’s order was dated December 18 but the case was shipped and the customer billed on January 10, 2021. B. Merchandise costing P600,000 was received on December 28, 2020 and the invoicewas recorded. The invoice was in the hands of the purchasing agents and it was marked, “On Consignment”. C. Merchandise received on January 6, 2021, costing P700,000 was entered in thepurchase register on January 7. The invoice showed shipment was made FOB shippingpoint on December 31, 2020. Because it was not on hand during the inventory count, it was not included. D. Merchandise costing P200,000 was received on January 6, 2021 and the relatedpurchase invoice was recorded January 5. The invoice showed the shipment was made on December 29, 2020, FOB destination. E. Goods costing P500,000 were sold and delivered on December 20. The goods wereincluded in the inventory because the sale was accompanied by a purchaseagreement requiring VVV to buy back the inventory in February 2021. F. Merchandise costing P150,000 was sold on an installment basis on December 15. Thecustomer took possession of the goods on that date. The merchandise was includedininventory because VVV still holds legal title. Historical experience suggests that full payment on installment sale is received approximately 99% of the time. G. A special machine costing P200,000, fabricated to order for a particular customer was finished in the shipping room on December 30. The customer was billed for P300,000on that date and the machine was excluded from inventory although it was shippedJanuary 4, 2021. How much of these items should be included in the inventory balance at December 31, 2020?
PROBLEM 5: In connection with your audit of VVV Manufacturing Company, you reviewedits inventory as of December 31, 2020 and found the following items:
A. A packing case containing a product costing P100,000 was standing in the shippingroom when the physical inventory was taken. It was not included in the inventorybecause it was marked “Hold for Shipping Instructions”. The customer’s order was dated December 18 but the case was shipped and the customer billed on January 10, 2021.
B. Merchandise costing P600,000 was received on December 28, 2020 and the invoicewas recorded. The invoice was in the hands of the purchasing agents and it was marked, “On Consignment”.
C. Merchandise received on January 6, 2021, costing P700,000 was entered in thepurchase register on January 7. The invoice showed shipment was made FOB shippingpoint on December 31, 2020. Because it was not on hand during the inventory count, it was not included.
D. Merchandise costing P200,000 was received on January 6, 2021 and the relatedpurchase invoice was recorded January 5. The invoice showed the shipment was made on December 29, 2020, FOB destination.
E. Goods costing P500,000 were sold and delivered on December 20. The goods wereincluded in the inventory because the sale was accompanied by a purchaseagreement requiring VVV to buy back the inventory in February 2021.
F. Merchandise costing P150,000 was sold on an installment basis on December 15. Thecustomer took possession of the goods on that date. The merchandise was includedininventory because VVV still holds legal title. Historical experience suggests that full payment on installment sale is received approximately 99% of the time.
G. A special machine costing P200,000, fabricated to order for a particular customer was finished in the shipping room on December 30. The customer was billed for P300,000on that date and the machine was excluded from inventory although it was shippedJanuary 4, 2021.
- How much of these items should be included in the inventory balance at December 31, 2020?
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