Prepare the necessary adjusting entry

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Question - Glenn Corporation sells electronic gadgets. In your audit of the company's financial statements for the years ended December 31, 2021, you have gathered the following data concerning inventory.  At December 31, 2020, the balance of the inventory account was P451,800, and the allowance for inventory write-down had a balance of P28,800. The relevant inventory cost and market data at December 31, 2021, are summarized below:

 

Cost

Sales Price

NRV

Normal Profit

Gadget A

P80,100

P82,350

P78,300

P5,760

Gadget B

84,600

83,700

76,500

6,696

Gadget C

112,500

116,100

99,900

10,449

Gadget D

174,600

184,500

177,300

18,450

Total

P451,800

P466,650

P432,000

P41,355

The company estimated the cost to sell at 10% of the selling price of each of the gadgets.

Required -

1. Compute the correct amount of inventory to be reported at December 31, 2021.

2. Prepare the necessary adjusting entry, if any, to reflect the correct amount of inventory at December 31, 2021.

Reference no: EM133143308

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