Having been engaged as external auditor of Duhat Company on February 28, 2019, you were unable to observe the taking of inventory on December 31, 2019, which was reported to amount to P360,000. The following data, however, were gathered by you: Inventory, December 31, 2019 P 320,000 Purchases during 2019 P 1,410,000 Cash sales during 2019 P 350,000 Shipment received on December 26, 2019, included physical inventory but, not recorded as purchases P 10,000 Deposits made with suppliers, entered as purchases, goods were not received in 2019 P 20,000 Collections on accounts receivable, 2019 P 1,800,000 Accounts Receivable, January 1, 2019 P 250,000 Accounts Receivable, December 31, 2019 P 300,000 Gross Profit percentage on sales 40% Determine how much is the estimated inventory shortage at December 31, 2019

Question

Having been engaged as external auditor of Duhat Company on February 28, 2019, you were unable to observe the taking of inventory on December 31, 2019, which was reported to amount to P360,000. The following data, however, were gathered by you:

Inventory, December 31, 2019 P 320,000

Purchases during 2019 P 1,410,000

Cash sales during 2019 P 350,000

Shipment received on December 26, 2019, included physical inventory but, not recorded as purchases P 10,000

Deposits made with suppliers, entered as purchases, goods were not received in 2019 P 20,000

Collections on accounts receivable, 2019 P 1,800,000

Accounts Receivable, January 1, 2019 P 250,000

Accounts Receivable, December 31, 2019 P 300,000

Gross Profit percentage on sales 40%

Determine how much is the estimated inventory shortage at December 31, 2019

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Inventory Valuation

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