On December 31, 2020, a fire broke out in the warehouse of Cialete Company, destroying all its inventory. The following information is presented for 2020: January 1 December 31 Inventory P 750,000 Accounts Receivable 510,000 P 490,000 Accounts Payable 350,000 590,000 Collection on accounts receivable 3,100,000 Payment to suppliers 1,950,000 Goods out on consignment at sales price 310,000 Salvage value of inventory 45,000 2019 2018 2017 Sales P3,000,000 P2,750,000 P2,100,000 Gross Profit 1,200,000 1,045,000 756,000 Requirements: Compute the following on December 31, 2020 1. Purchases 2. Sales 3. Inventory Loss

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A: The solution for the above mentioned question is given in the following steps for your reference.

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A:

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A:

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.