On December 31, 2020, an entity experienced a decline in the value of inventory resulting in a writedown from

P4,000,000 cost to P3,500,000 net realizable value. The entity used the allowance method to record the

necessary adjustment. In 2021, market conditions have improved dramatically. On December 31, 2021, the

inventory had a cost of P5,000,000 and net realizable value of P4,800,000. The entity made purchases of

P20,000,000 in 2021?

1. What amount should be recognized as gain on reversal of inventory writedown in 2021?

a. 200,000

b. 300,000

c. 500,000

d. 0

2. What amount should be reported as cost of goods sold in 2021?

a. 19,000,000

b. 19,300,000

c. 18,700,000

d. 24,000,000