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. Calculate the Corrected Ending Inventory for Each Quarter

   To find the corrected ending inventory, we adjust the reported ending inventory for each quarter based on the errors noted. The adjustments are:

   • 1st Quarter: Understated by P10,000
   • 2nd Quarter: Overstated by P20,000
   • 3rd Quarter: Overstated by P40,000

   Therefore:

   • Corrected Ending Inventory for 1st Quarter = $460,000 + P10,000 = P470,000$
   • Corrected Ending Inventory for 2nd Quarter = $525,000 - P20,000 = P505,000$
   • Corrected Ending Inventory for 3rd Quarter = $620,000 - P40,000 = P580,000$

2. Calculate the Corrected Cost of Sales for Each Quarter

   The Cost of Sales is computed as follows:

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

   Using the previously calculated adjusted ending inventories:

   • For 1st Quarter (Available for Sale = P1,390,000): $$ \text{Corrected Cost of Sales} = P1,390,000 - P470,000 = P920,000 $$
   • For 2nd Quarter (Available for Sale = P1,440,000): $$ \text{Corrected Cost of Sales} = P1,440,000 - P505,000 = P935,000 $$
   • For 3rd Quarter (Available for Sale = P1,435,000): $$ \text{Corrected Cost of Sales} = P1,435,000 - P580,000 = P855,000 $$

3. Summary of Corrected Cost of Sales for Each Quarter

   Thus, the corrected cost of sales for each quarter is:

   • 1st Quarter: P920,000
   • 2nd Quarter: P935,000
   • 3rd Quarter: P855,000