Problem 1

On September 30, 2021, a fire at Avida Company's warehouse caused severe damage to its entire inventory. Based on recent history, Avida has a gross profit of 30% of net sales. A physical inventory disclosed usable damage goods which Avida estimates can be sold to a jobber for 50,000. The following information is available from Avida's records for the nine months ended September 30, 2021.

Inventory, January 1 550,000

Total Purchases received and recorded, Jan. 1 - Sept. 30 3,000,000

Total freight cost of goods purchased and received 60,000

Total credit memo received on goods purchased and received 200,000

Total discounts taken on purchases 80,000

Invoice received for goods purchased but still in transit shipped September 30, 2021, FOB shipping point 120,000

Total sales delivered and recorded, Jan. 1 - Sept. 30 3,600,000

Unrecorded sales invoice for goods delivered 300,000

Total sales returns accounted and recorded, Jan. 1 - Sept. 30 160,000

Total sales discounts taken by customers on recorded sales 40,000

Using the gross profit method, how much is the inventory loss?

a.602,000

b.662,000

c.782,000

d.832,000

Problem 2

Examination of the records of Tivoli Company for the year ended December 31, 2021 revealed the following:

During 2021, Tivoli received P40,000 as cash advance from a customer for merchandise to be manufactured and shipped during 2022. The P40,000 was credited to sales revenue.

Inventory at January 1, 2021 was overstated by P71,000.

Inventory at December 31, 2021 was understated by P96,000.

Profit (before adjustments) reported on the 2021 profit or loss was P658,000.

What is the correct profit for the year ended December 31, 2021?

a.P875,000

b.P865,000

c.P785,000

d.P531,000