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[Mollynana]

Nelia Company had used the weighted average method of inventory since it began its operation in 2019. Nelia decided to change to FIFO method for determining inventory costs at the beginning of 2021. The following schedule shows the net income and year-end inventory balances for the past two years 2019 and 2020:

2019

Net income using weighted average Year-end inventory-FIFO

P3,000,000

2020

P3,250,000

400,000

600,000

Year-end inventory-weighted average The merchandise inventory end in 2020 is 10,000 units.

250,000 500,000

The trial balance at December 31, 2021 included the following accounts:

Sales (at SP of P80/unit) Sales discount

P6,400,000

Purchases

64,000 6,480,000

Purchase discount

980,000

The inventory purchases during 2021 were as follows:

Purchases, 1st quarter ended

Units

Unit cost

20,000

30,000

40,000

P62

64

Purchases 2nd quarter ended

66

68

Purchases 3rd quarter ended Purchases 4th quarter ended

10,000

Nelia's accounting policy is to report inventory on its financial statements at the lower of cost or net realizable value, applied to total inventory.

inventory was P67 per unit and the estimated selling price was P70 per unit and Nelia has determined that on December 31, 2021, the replacement cost of its the estimated cost of disposal was P5. The normal profit margin is P8 per unit.


Based on the above data, compute for the following: cost of goods sold after inventory writedown in 2021

 

[🤖]

To compute the cost of goods sold after inventory write-down in 2021, we need to determine the ending inventory under the FIFO method and compare it to the net realizable value.

1. Compute the ending inventory under the FIFO method:
- First, determine the units sold in each quarter based on the purchases and units available:
- 1st quarter: 20,000 units
- 2nd quarter: 30,000 units
- 3rd quarter: 40,000 units
- 4th quarter: 10,000 units
- Second, calculate the cost of goods sold for each quarter using the respective unit costs:
- 1st quarter: 20,000 units x P62/unit = P1,240,000
- 2nd quarter: 30,000 units x P64/unit = P1,920,000
- 3rd quarter: 40,000 units x P66/unit = P2,640,000
- 4th quarter: 10,000 units x P68/unit = P680,000
- Finally, add up the costs of goods sold for each quarter to get the total cost of goods sold under the FIFO method:

Total Cost of Goods Sold = P1,240,000 + P1,920,000 + P2,640,000 + P680,000 = P6,480,000

2. Determine the net realizable value:
- The estimated selling price per unit is P70, and the estimated cost of disposal is P5.
- Therefore, the net realizable value per unit is P70 - P5 = P65.
- Multiply the net realizable value per unit by the ending inventory under the FIFO method to get the net realizable value of the inventory.

Net Realizable Value = P65/unit x Ending Inventory under FIFO

3. Compare the net realizable value to the total cost of goods sold under the FIFO method:
- If the net realizable value is lower than the cost of goods sold, there is an inventory write-down.
- Calculate the inventory write-down as the excess of the cost of goods sold over the net realizable value.

Inventory Write-down = Total Cost of Goods Sold - Net Realizable Value

By following these steps, you can calculate the cost of goods sold after inventory write-down in 2021.

 

[Mollynana]

Nelia Company had used the weighted average method of inventory since it began its operation in 2019. Nelia decided to change to FIFO method for determining inventory costs at the beginning of 2021. The following schedule shows the net income and year-end inventory balances for the past two years 2019 and 2020:

2019

Net income using weighted average Year-end inventory-FIFO

P3,000,000

2020

P3,250,000

400,000

600,000

Year-end inventory-weighted average The merchandise inventory end in 2020 is 10,000 units.

250,000 500,000

The trial balance at December 31, 2021 included the following accounts:

Sales (at SP of P80/unit) Sales discount

P6,400,000

Purchases

64,000 6,480,000

Purchase discount

980,000

The inventory purchases during 2021 were as follows:

Purchases, 1st quarter ended

Units

Unit cost

20,000

30,000

40,000

P62

64

Purchases 2nd quarter ended

66

68

Purchases 3rd quarter ended Purchases 4th quarter ended

10,000

Nelia's accounting policy is to report inventory on its financial statements at the lower of cost or net realizable value, applied to total inventory.

inventory was P67 per unit and the estimated selling price was P70 per unit and Nelia has determined that on December 31, 2021, the replacement cost of its the estimated cost of disposal was P5. The normal profit margin is P8 per unit.


Based on the above data, compute for the following::

Loss on inventory write-down in 2021.

a. Nil

c. P100,000

b. P50,000

d. P120,000



Cost of goods sold after inventory write-down in 2021.

a. P4,150,000 b. P4,100,000

C. P4,120,000

d. P4,100,000