MERC, Inc. carries out business of readymade garments through large shops in the major cities of Philippines. Its inventory ledger account balance at December 31, 2020 under the perpetual inventory system, was 70,693,830. The physical count revealed that the cost of inventory on hand was 68,758,200 only. Its owner M. Yanagida expected a small inventory shortfall due to damage and petty theft but considered this shortfall to be excessive.

Based on the information above, answer the following

1. Determine the value of inventory that should be reported in the December 31, 2020 statement of financial position.

2. How much is the inventory shortage or overage?

3. Determine the impact of each item (A-H) in your reconciliation of the inventory records with the physical count.

4. Prepare the journal entry to record the inventory shortage or overage.

On January 5, 2021, M. Yanagida carried out an investigation and discovered the following: A. List of inventory at a shop situated in Costa Leona had been under-footed by P147,510. B. Included in the physical count were goods worth P327,800 which were held on behalf of a third party. C. Goods sold to RECS Co. were recorded in inventory ledger account at the sale price of P 1,278,420. The goods were sold at cost plus 30% D. Goods costing P671,990 purchased on credit from Lopez Shipping Lines were received on December 28, 2020 and include in the physical count. However, the purchase had not been recorded. E. Goods costing P491,700 were invoiced to Riegosteel for P696,575 on December 29, 2020 on FOB Shipping Point basis. The goods were actually dispatched to the customer on January 2, 2021. F. On December 25, 2020 goods costing P508,090 were sold on credit to ZAM Co. for P819,500. The goods were shipped on December 28, 2020, FOB Shipping point and were received by the customer on January 2, 2021. G. Goods costing P4,097,500 were returned to Riego Holdings, Inc. on December 30, 2020. A credit note was received from the supplier on January 5, 2021 and entered in the books in January 2021. No payment had been made for the goods prior to their return H. On December 23, 2020 goods costing P655,600 were purchased on credit from Vesarius Hidalgo Riego V, Inc. The purchase was recorded on December 27, 2020 i.e. when the goods were lifted by the transport company appointed by R. Riego from the warehouse of Vesarius Hidalgo Riego V, Inc. The goods arrived on January 3, 2021. Based on the information above, answer the following: 1. Determine the value of inventory that should be reported in the December 31, 2020 statement of financial position. 2. How much is the inventory shortage or overage? 3. Determine the impact of each item (A-H) in your reconciliation of the inventory records with the physical count. 4. Prepare the journal entry to record the inventory shortage or overage. On January 5, 2021, M. Yanagida carried out an investigation and discovered the following: A. List of inventory at a shop situated in Costa Leona had been under-footed by P147,510. B. Included in the physical count were goods worth P327,800 which were held on behalf of a third party. C. Goods sold to RECS Co. were recorded in inventory ledger account at the sale price of P 1,278,420. The goods were sold at cost plus 30% D. Goods costing P671,990 purchased on credit from Lopez Shipping Lines were received on December 28, 2020 and include in the physical count. However, the purchase had not been recorded. E. Goods costing P491,700 were invoiced to Riegosteel for P696,575 on December 29, 2020 on FOB Shipping Point basis. The goods were actually dispatched to the customer on January 2, 2021. F. On December 25, 2020 goods costing P508,090 were sold on credit to ZAM Co. for P819,500. The goods were shipped on December 28, 2020, FOB Shipping point and were received by the customer on January 2, 2021. G. Goods costing P4,097,500 were returned to Riego Holdings, Inc. on December 30, 2020. A credit note was received from the supplier on January 5, 2021 and entered in the books in January 2021. No payment had been made for the goods prior to their return H. On December 23, 2020 goods costing P655,600 were purchased on credit from Vesarius Hidalgo Riego V, Inc. The purchase was recorded on December 27, 2020 i.e. when the goods were lifted by the transport company appointed by R. Riego from the warehouse of Vesarius Hidalgo Riego V, Inc. The goods arrived on January 3, 2021. Based on the information above, answer the following: 1. Determine the value of inventory that should be reported in the December 31, 2020 statement of financial position. 2. How much is the inventory shortage or overage? 3. Determine the impact of each item (A-H) in your reconciliation of the inventory records with the physical count. 4. Prepare the journal entry to record the inventory shortage or overage