following data concerning inventory. At December 31, 2015, the balance in Zebra's Inventory account was P502,000, and the Allowance for Inventory Writedown had a balance of P32,000. The relevant inventory cost and market data at December 31, 2016, are summarized in the schedule below. Cost Sales Price Normal Replacement Cost Net Realizable Value P87,000 85,000 111,000 197,000 P480,000 Profit P89,000 94,000 125,000 194,000 P502,000 P86,000 92,000 135,000 114,000 P91,500 93,000 129,000 205,000 P518,500 Guitars Xylophones Trumpets Violins P6,400 7,440 11,610 20,500 P45,950 Total P427,000 23. What is the proper balance in the Allowance for Inventory Writedown at December 31, 2016? a. P75,000 b. P22,000 c. P32,000 d. P25,000 24. The adjusting entry on December 31, 2016, to arrive at the proper allowance balance should be a. Allowance for inventory writedown Gain on inventory recovery 7,000 7,000 b. Loss on inventory writedown 7,000 Allowance for inventory writedown 7,000 c. Allowance for inventory writedown Gain on inventory recovery 3,000 3,000 d. Loss on inventory writedown 43,000 Allowance for inventory writedown 43,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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ZEBRA MUSIKAHAN CO. sells musical instruments. In your audit of the company's
financial statements for the year ended December 31, 2016, you have gathered the
following data concerning inventory.
At December 31, 2015, the balance in Zebra's Inventory account was P502,000, and the
Allowance for Inventory Writedown had a balance of P32,000. The relevant inventory cost
and market data at December 31, 2016, are summarized in the schedule below.
Cost
Replacement
Cost
Sales Price
Net
Normal
Realizable
Profit
Value
Guitars
Xylophones
Trumpets
Violins
Total
P89,000
94,000
125,000
194,000
P502,000
P86,000
92,000
135,000
114,000
P427,000
P91,500
93,000
129,000
205,000
P518,500
P87,000
85,000
111,000
197,000
P480,000
P6,400
7,440
11,610
20,500
P45,950
23. What is the proper balance in the Allowance for Inventory Writedown at December 31, 2016?
a. P75,000
b. P22,000
c. P32,000
d. P25,000
24. The adjusting entry on December 31, 2016, to arrive at the proper allowance balance should
be
a. Allowance for inventory writedown
Gain on inventory recovery
7,000
7,000
b. Loss on inventory writedown
7,000
Allowance for inventory writedown
7,000
c. Allowance for inventory writedown
Gain on inventory recovery
3,000
3,000
d. Loss on inventory writedown
43,000
Allowance for inventory writedown
43,000
Transcribed Image Text:ZEBRA MUSIKAHAN CO. sells musical instruments. In your audit of the company's financial statements for the year ended December 31, 2016, you have gathered the following data concerning inventory. At December 31, 2015, the balance in Zebra's Inventory account was P502,000, and the Allowance for Inventory Writedown had a balance of P32,000. The relevant inventory cost and market data at December 31, 2016, are summarized in the schedule below. Cost Replacement Cost Sales Price Net Normal Realizable Profit Value Guitars Xylophones Trumpets Violins Total P89,000 94,000 125,000 194,000 P502,000 P86,000 92,000 135,000 114,000 P427,000 P91,500 93,000 129,000 205,000 P518,500 P87,000 85,000 111,000 197,000 P480,000 P6,400 7,440 11,610 20,500 P45,950 23. What is the proper balance in the Allowance for Inventory Writedown at December 31, 2016? a. P75,000 b. P22,000 c. P32,000 d. P25,000 24. The adjusting entry on December 31, 2016, to arrive at the proper allowance balance should be a. Allowance for inventory writedown Gain on inventory recovery 7,000 7,000 b. Loss on inventory writedown 7,000 Allowance for inventory writedown 7,000 c. Allowance for inventory writedown Gain on inventory recovery 3,000 3,000 d. Loss on inventory writedown 43,000 Allowance for inventory writedown 43,000
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