Question

Exercise 7 (Finding unknown balances) An auditor for the Internal Revenue Service is trying to reconstruct some partially destroyed records of two taxpayers. For each of the cases in the accompanying list, find the unknown designated by capital letters (figures are assumed to be in thousands). Case 1 Case 2 Accounts receivable, December 31, 20X1 Cost of goods sold Accounts payable, January 1, 20xI P6,000 P 2,100 A 20,000 3,000 1,700

Answer 1

COST OF GOODS MANUFACTURED
	Case 1		Case 2
Direct materials used	8000		12000
Direct labor	3000		5000
Indirect manufacturing costs	7000		500
Total manufacturing costs for the year		18000		17500
Add: Beginning WIP inventory		0		800
Total cost of work in progress during the year		18000		18300
Less: Ending WIP inventory		0		3000
Cost of goods manufactured		18000		21300
COST OF GOODS SOLD
Beginning finished goods inventory		4000		4000
Cost of goods manufactured		18000		21300
Cost of goods available for sale		22000		25300
Ending finished goods inventory		1300		5300
Cost of goods sold		20700		20000
INCOME STATEMENT
Revenues		32000		31800
Cost of goods sold	[32000-11300]	20700		20000
Gross Margin		11300		11800