Compute the corrected cost of sales for each of the quarter assuming: 1st Quarter: understated by P10,000, 2nd Quarter: overstated by P20,000, 3rd Quarter: overstated by P40,000.

Steps to Solve

1. Understand the Cost of Sales Formula

The Cost of Sales can be calculated using the formula:

$$ \text{Cost of Sales} = \text{Available for Sale} - \text{Ending Inventory} $$

Where:

• Available for Sale is the sum of Beginning Inventory and Net Cost of Purchases.

2. Calculate Available for Sale for Each Quarter

For each quarter, compute the Available for Sale:

• 1st Quarter: $$ \text{Available for Sale} = 340,000 + 1,050,000 = 1,390,000 $$

• 2nd Quarter: $$ \text{Available for Sale} = 460,000 + 980,000 = 1,440,000 $$

• 3rd Quarter: $$ \text{Available for Sale} = 525,000 + 910,000 = 1,435,000 $$

3. Adjust Ending Inventory for Errors

Modify the Ending Inventory based on the given errors:

• 1st Quarter: Underrated by P10,000 $$ \text{Adjusted Ending Inventory} = 460,000 + 10,000 = 470,000 $$

• 2nd Quarter: Overrated by P20,000 $$ \text{Adjusted Ending Inventory} = 525,000 - 20,000 = 505,000 $$

• 3rd Quarter: Overrated by P40,000 $$ \text{Adjusted Ending Inventory} = 620,000 - 40,000 = 580,000 $$

4. Calculate Corrected Cost of Sales for Each Quarter

Apply the adjustments to calculate the corrected Cost of Sales:

• 1st Quarter: $$ \text{Cost of Sales} = 1,390,000 - 470,000 = 920,000 $$

• 2nd Quarter: $$ \text{Cost of Sales} = 1,440,000 - 505,000 = 935,000 $$

• 3rd Quarter: $$ \text{Cost of Sales} = 1,435,000 - 580,000 = 855,000 $$