Problem 12-5 (AICPA Adapted) Tarmac Company prepared a trial balance at year-end which included the following accounts:

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Problem 12-5 (AICPA Adapted)
Tarmac Company prepared a trial balance at year-end which
included the following accounts:
15,000,000
1,000,000
9,400,000
400,000
Sales (100,000 units at P150)
Sales discount
Purchases
Purchase discount
The inventory purchases during the year were as follows:
Units Unit cost Total cost
1,200,000
1,950,000
2,800,000
3,750,000
900,000
60
Beginning inventory, January 1
Purchases, quarter ended March 31 30,000
Purchases, quarter ended June 30
Purchases, quarter ended Sept. 30
Purchases, quarter ended Dec. 31
20,000
65
70
40,000
50,000
10,000
75
90
150,000
10,600,000
The accounting policy is to report inventory at the lower of
cost and net realizable value applied to total inventory. Cost is
determined under the first-in, first-out method.
At the beginning of current year, the entity reported an
allowance for inventory writedown of P400,000.
At year-end, the entity determined that the replacement cost
of inventory was P70 per unit and the net realizable value
was P72 per unit. The normal profit margin is P10 per unit.
Required:
1. Prepare a schedule of cost of goods sold for the current year.
2. Prepare journal entries to record the ending inventory and
any inventory writedown.
Transcribed Image Text:Problem 12-5 (AICPA Adapted) Tarmac Company prepared a trial balance at year-end which included the following accounts: 15,000,000 1,000,000 9,400,000 400,000 Sales (100,000 units at P150) Sales discount Purchases Purchase discount The inventory purchases during the year were as follows: Units Unit cost Total cost 1,200,000 1,950,000 2,800,000 3,750,000 900,000 60 Beginning inventory, January 1 Purchases, quarter ended March 31 30,000 Purchases, quarter ended June 30 Purchases, quarter ended Sept. 30 Purchases, quarter ended Dec. 31 20,000 65 70 40,000 50,000 10,000 75 90 150,000 10,600,000 The accounting policy is to report inventory at the lower of cost and net realizable value applied to total inventory. Cost is determined under the first-in, first-out method. At the beginning of current year, the entity reported an allowance for inventory writedown of P400,000. At year-end, the entity determined that the replacement cost of inventory was P70 per unit and the net realizable value was P72 per unit. The normal profit margin is P10 per unit. Required: 1. Prepare a schedule of cost of goods sold for the current year. 2. Prepare journal entries to record the ending inventory and any inventory writedown.
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