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Question 1: A company has decided to switch from using the FIFOmethod of inventory valuation to using the average

cost method (AVCO). In the first accounting period

where the change is made, opening inventory valued

by the FIFO method was P53,200. Closing inventory

valued by the AVCO method was P59,800. Total

purchases during the period were P136,500. Using the

AVCO method, opening inventory would have been

valued at P56,200.

What is the cost of goods that should be included in

the income statement for the period?


PLEASE COMPLETE SOLUTION TO ALL PROBLEMS OR ELSE I WILL NOT RATE


Question 2:

Gurkha sells carpets from several retail outlets. In

previous years the company has undertaken for fitting

the carpets in customers' premises. Customers pay for

the carpets at the time they are ordered. The average

length of time from a customer ordering a carpet to its

fitting is 15 days. In previous years, Gurkha had not

recognized a sale in income until the carpet had been

successfully fitted as the rectification costs of any

fitting error would be expensive. From 1 April 2019

Gurkha changed its method of trading by subcontracting

the fitting to approved contractors. Under

this policy the sub-contractors are paid by Gurkha and

they (the subcontractors) are liable for any errors

made in the fitting. Because of this Gurkha is

proposing to recognize sales when customers order

and pay for the goods, rather than when they have

been fitted. Details of the relevant sales figures are:

Sales made in retail outlets for the

year to 31 March 2020

P23,000,000

Sales value of carpets fitted in the

15 days to 15 April 2019

1,200,000

Sales value of carpets fitted in the

15 days to 15 April 2020

1,600,000

Note: the sales value of carpets fitted in the 15 days to

15 April 2019 are not included in the annual sales

figure of P23 million, but those for the 15 days to 15

April 2020 are included.

Calculate the amount that would be included in sales

revenue for carpets in the year ended 31 March 2020.


Question 3:

Cebu Company reported a retained earnings balance of

P5,000,000 at January 1, 2020. In August 2020, Cebu

determined that insurance premiums of P600,000 for

the three-year period beginning January 1, 2019, had

been paid and fully expensed in 2019. Cebu has a

30% income tax rate. What amount should Cebu

report as adjusted beginning retained earnings in

2020?

Answer & Explanation
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