UNIVERSITY OF SANTO TOMAS

AMV COLLEGE OF ACCOUNTANCY

BASIC FINANCIAL ACCOUNTING & REPORTING
ACCOUNTING FOR MERCHANDISE BUSINESS

NAME:____________________________________ SECTION:_________________

PRACTICE SETS

A. Sales transactions with Trade and Cash Discount Calculations

On October 1, 2018, MIKE DAIRIES sold merchandise with the following LIST PRICES:

LIST PRICE Trade Discount Credit Terms Date Paid

a. P120,000 30% 2/10, n/30 October 8

b. P180,000 40% 2/10, 1/15, n/30 October 15
c. P175,000 – 2/10, n/30 October 11
d. P155,000 20% COD ?
e. P190,000 10%, 15% 3% EOM October 31
f. P286,000 40% 2/10, n/30 October 12

Required:

For each of the sales terms, determine the following:

1. the amount reflected on INVOICE PRICE,

2. the amount of cash received,
3. the amount of discounts to be recorded.
4. Prepare Journal Entries in the BOOK of Mike Dairies on October 1 and on date of payment.

B. Purchase transactions with Trade, Cash Discount computations AND Shipping terms and returns.

For each of the following MIKEY COMPANY PURCHASES, assume that credit terms are 2/10,n/30 and that any
credit memorandum was issued and recorded before MIKEY Company made the payments within the discount
period.

TRADE Shipping Shipping CREDIT Memo

LIST PRICES DISCOUNTS terms Cost (based from invoice price)

a. P 120,000 10%,8*% FOB shipping point; P 1,800 FREIGHT COLLECT P 30,000

b. 235,000 20% FOB destination; P 2,300 FREIGHT COLLECT 22,000
c. 286,500 15%,5% FOB destination; P 4,900 FREIGHT PREPAID 45,000
d. 140,000 12% FOB shipping point P3,700 FREIGHT PREPAID 18,000

Required:
1. Prepare Journal Entries on the Books of Mikey Company.
1. Determine the cash discount availed by MIKEY.
2. Determine the cash remitted.

C. SALES transactions with Trade, Cash Discount computations AND Shipping terms and returns.

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 The following are the transactions of BIGBALL Medical Supplies that are related to SALES OF MERCHANDISE
during the month of March 2018:

March 4 – Cash sales from March 1 to 4, covered by cash invoices 1091 to 1122. Invoice price P140,500,
6 – Sold merchandise to Manila Maternity Clinic, P200,500, . Term: 2/10,n/30; FOB Shipping point.
10 – Manila Maternity Clinic returned goods billed at P10,500. A credit memorandum, was given to support the return.
11- Paid the bill received from Victory Trucking Company, P7,500. This represents the cost of the freight of the goods
sold to manila Maternity Clinic on March 6.
14 – Cash sales from March 5 to 14, covered by cash invoices 1123 to 1133. List Price P222,700 less 10%,10% .
16 – Refunded a customer for goods returned, P11,120
16 – Collected in full the account of Manila Maternity Clinic.
18 – Paid for the freight of goods shipped to customers, P8,150
20 – Sold merchandise to Rizal Community Clinic, P120,750, . Term 2/10,n/30.
22 – Granted a P7,800 allowance to Rizal Community Clinic. Issued a credit memorandum in support of the billing.
25 – Received P7,000 from Baliuag Hospital, representing cash advance on the merchandise to be delivered in April.
28 – Cash sales from March 15 to 28, P350,750, . Issued cash invoices 1136 to 1145.
28 – Sold to Medina Merchandising a display cabinet at its book value of P10,000 cost P12,000
30 – Collected half of the balance due from Rizal Community Clinic. Discount was granted on the portion collected.

REQUIRED:
PREPARE JOURNAL ENTRIES

D. COMPUTATION OF PURCHASES/ COST OF SALES/ SALES/ GROSS PROFIT

I. HOWK’s BODYBAG Store sells two brands of BODYBAG: Black and Gray. Purchases for the month of October
consisted of 30 Black brand units at P1,500 each and 20 Gray units at P1,800 each. At the end of the month an inventory
count showed that 12 Black brand units and 5 Gray brand units were still on hand.

Required: (FOR ITEMS 1-10)

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 a. Compute for each brand: purchases(1&2), merchandise inventory at the end of October(3-4) and cost of
sales(5-6).

b. Assume a Black brand sells for P2,400 and a Gray brand sells for P2,750. Compute for each brand: sales
revenue(7-8) and gross profit on sales(9-10).

II. Still using the following information. Assume that in the following month another 25 Black brand units and 20 Gray
brand units were purchased from the suppliers at the same prices. And at the end of the month only 18 Black brand units
and 10 Gray units were on hand.

Required: (FOR ITEMS 11-22)

a. Compute for each brand: cost of purchases(11-12), total goods available for sale(13-14), merchandise
inventory end of November(15-16) and the cost of sales(17-18).

b. Assuming the same sales prices, compute for each brand: sales revenue(19-20) and the gross profit on sales.
(21-22)

III. During the year MICHAEL Home and Garden purchased potteries, plants, dried flowers, candles and other home
and garden decors at a total cost of P300,000. For each of the following cases, calculate the Total Goods Available
for Sale(A) and the Cost of Sales(B):

Case Case 1 Case 2 Case 3 Case 4 Case 5

Beginning Inventory P0 P150,000 P780,360 P110,000 P0
Freight-In 15,000 0 40,000 27,000 25,900
Returns and Allowances 5,560 25,720 0 21,600 11,090
Discounts 0 45,900 0 0 19,550
Ending Inventory 0 0 750,348 75,500 85,000
A (23) (25) (27) (29) (31)
B (24) (26) (28) (30) (32)

F. The ledger accounts of the Christine SUSAN Bags for the year ended Dec. 31, 2018 are as follows:

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 Ac c u. De p re c ia tio n-O ff.Bld g . 150,000.00 No te s Pa ya b le d ue in 2 yrs. 200,000.00
Ac c u. De p re c ia tio n-O ff.Eq uip t. 150,000.00 O ffic e Build ing 1,600,000.00
Ac c o unts Re c e iv a b le 136,000.00 O ffic e Eq uip me nt 570,000.00
Ac c o unts Pa ya b le 74,000.00 O ffic e Su p p lie s 42,000.00
C a sh 72,000.00 Pre p a id Ad v e rtisin g 75,000.00
Tra n sp o rta tio n In 72,000.00 Purc ha se s Disc o u nts 172,000.00
In su ra nc e Exp e nse 75,000.00 Purc ha se s Re ts. & Allo w . 133,000.00
In te re st Exp e n se 208,000.00 Purc ha se s 2,643,000.00
SUSAN, C a p ita l 1,510,000.00 Sa la rie s Exp e nse 862,000.00
SUSAN, Withd ra w a ls 200,000.00 Sa le s Disc o unts 161,000.00
La nd 400,000.00 Sa le s Re turns & Allo w . 187,000.00
M e rc ha nd ise Inv e nto ry 598,000.00 Sa le s 4,600,000.00
M o rtg a g e Pa ya b le 1,100,000.00 Tra v e l e xp e nse 188,000.00

Additional information:

a. Office supplies consumed during the year amounted to P17,000

b. Advertising Expense in the amount of P25,000 has expired during the year.
c. Salaries of P21,000 have accrued as at Dec. 31, 2018.
d. Depreciation on the office building and on the office equipment amounted P15,000 and P20,000, respectively.
e. The Dec. 31, 2018 ending inventory is P723,000.

Required:
Prepare the worksheet.
Prepare the financial statements.
Prepare the adjusting and closing entries.

G. The accounts of Marissa Babilonia Health Store selected from the December 31,2018 Trial balance are the follows:

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 Ad v e rtisin g Exp e n se 150,000.00
Tra nsp o rta tio n O ut 260,000.00
De p re c ia tio n Exp e nse -O ffic e Eq uip me n t 110,000.00
De p re c ia tio n Exp e nse -Sto re Eq u ip me nt 140,000.00
Tra nsp o rta tio n In 100,000.00
M e rc ha n d ise Inv e nto ry, (1/ 1/ 2018) 1,160,000.00
M e rc ha n d ise Inv e nto ry, (12/ 31/ 2018) 1,040,000.00
M isc e lla ne o u s Exp e nse 90,000.00
O ffic e Su p p lie s Exp e n se 430,000.00
Pu rc h a se s 6,710,000.00
Pu rc h a se s Re tu rn & Allo w a n c e s 250,000.00
Pu rc h a se s Disc o u nts 180,000.00
Sa la rie s Exp e nse -Se lling 960,000.00
Sa la rie s Exp e nse -G e ne ra l 1,130,000.00
Sa le s 9,810,000.00
Sa le s Re turn s a n d Allo w a nc e s 260,000.00
Sa le s Disc o un ts 140,000.00
Se lling Sup p lie s Exp e nse 70,000.00

Required:

1. Prepare Income statement using the function of expense method.

COMPREHENSIVE PROBLEM

H. ACCOUNTING CYCLE FOR MERCHANDISE BUSINESS

The account of NOQUIT COMPANY as at December 1, 2018 are listed below:

Cash 214,000

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 Accounts receivable 338,000
Merchandise Inventory 426,000
Short-Term Investment 500,000
Office supplies 31,000
Prepaid insurance 48,000
Land 370,000
Building 900,000
Accum. depreciation – bldg 250,000
Equipment 800,000
Accum. depreciation – equip. 200,000
Accounts payable 172,000
Mortgage payable 1,200,000
NOQUIT Capital _______ 1,805,000
3,627,000 3,627,000

The following transactions occurred during the month of December 2018:

Dec. 1 Settled the accounts payable of P115,000 less 2% discount.

3 Collected the accounts receivable of P180,000 less 3% discount.
4 Sold merchandise on account to PAPACOY SUPPLIES, P210,000. Terms: FOB destination, 3/10, n/30.
PAPACOY SUPPLIES paid the freight for P3,000.
5 Received returns from PAPACOY SUPPLIES, P25,000.
7 Purchased merchandise from OSTIQUE PRODUCTS, P232,000. Terms: FOB shipping point, 2/10, n/30.
NOQUIT COMPANY paid P2,000 for the transportation cost.
9 Returned goods to OSTIQUE PRODUCTS, P12,000 acquired on December 7.
10 Paid interest on mortgage payable, P8,000.
11 Received payment from PAPACOY SUPPLIES for the amount due.
12 Sold merchandise to OANI SHOPPERS, P330,000. Terms: FOB shipping point, 3/10, n/30.
18 Received payment from OANI SHOPPERS from the December 12 sales.
19 Sold merchandise to NAVALES SHOP, P242,000. Term: FOB shipping point, 3/10, n/30. NOQUIT
COMPANY paid P5,000 for the freight.
20 Paid P9,000 for representation expense.
29 Received from NAVALES SHOP returned merchandise in the amount of P18,000 from the December 19 sales.
30 The owner, Genevieve, withdraw merchandise for personal use. Cost – P20,000; Selling price – P30,000.

Additional information

1. Salaries in the amount of P73,000 have accrued on December 31.

2. Insurance coverage with premium of P2,000 has expired at month-end.
3. Depreciation on the building and on the equipment for the month amounted to P3,000 and P4,500, respectively.
4. Office supplies on hand at month-end amounted to P7,000.
5. There’s an accrued interest of P 2,800.
6. Short-term investment earned an unrecorded investment income amounting P 15,000.
7. A count of the inventory amounted to P453,000 on December 31, 2018.

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REQUIRED

1. Post the Beginning Balances to the ledger (use T-account)

2. Journalize the transactions during December 2018. (Use periodic inventory system)
3. Post the journal to the T-account.
4. Prepare the Unadjusted Trial Balance
5. Prepare the adjusting journal entries
6. Prepare Worksheet reflecting the adjusted trial balance
7. Prepare Functional form Income Statement, Statement of Changes in Owner’s Equity and Statement of
Financial Position.
8. Prepare the closing entries.
9. Prepare the Post-Closing Trial Balance
10. Prepare Reversing entrie/s

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