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1. Decide whether the item is included as part of Inventories as of December 31, 2019:
2. Eatable Company, a VAT-registered entity is engaged in the following transactions during the month of
December, the last month of the calendar year:
July 1 Purchased merchandise from A Company for P50,000, 2/10, n/30.
July 2 Purchased merchandise from B Company for P200,000, 2/10, n/30.
July 3 Purchased merchandise from C Company for P300,000, 2/10, n/30
July 12 Paid B Company for the July 2 purchase.
July 30 Paid A Company for the July 1 purchase.
July 31 Purchase returns during the month amounted to P10,000.
Assuming the invoice price of goods purchased is inclusive of 12% VAT, and that the related freight cost
of the transaction is P2,000.
Required:
Prepare the journal entries (perpetual and periodic system) on the books of Eatable under the following
SHIPPING TERMS
On October 31, the company’s suppliers reduced their prices from the most recent purchase prices by the
following percentages: product C, 20%; product P, 10%; product A, 8%. Accordingly, Natsu decided to reduce
its sales price on all items by 10%, effective November 1. Jennifer’s selling cost is 10% of sales price. Products
C and P have a normal profit (after selling costs) of 30% on sales prices, while the normal profit on product A
(after selling cost) is 15% of sales price.
4. Killua Company is on a calendar year basis. The following data were found during your examination:
a. Goods in transit shipped F.O.B. shipping point on December 28 by a supplier in the amount of P10,000,
had been excluded from the inventory, and further testing revealed that the purchase had been
recorded.
b. Goods costing P3,000 had been received, included in inventory, and recorded as a purchase. However,
upon your inspection, the goods were found to be defective and would be immediately returned.
c. Materials costing P17,000 and billed on December 30 at a selling price of P26,400 had been
segregated in the warehouse for shipment to a customer. The materials had been excluded from
inventory as a signed purchase order had been received from the customer. Terms, F.O.B. destination.
d. Goods costing P7,000 was out on consignment with Gon, Inc. Since the monthly statement from Gon,
Inc. listed those materials as on hand, the items had been excluded from the final inventory and
invoiced on December 31 at P8,000.
e. The sale of P15,000 worth of materials and costing P12,000 had been shipped FF.O.B. point of
shipment on December 31. However, this inventory was found to be included in the final inventory.
f. Goods costing P10,000 and selling for P14,000 had been segregated, but not shipped at December 31,
and were not include in the inventory. A review of the customer’s purchase order set forth as F.O.B.
destination. The sale had not been recorded.
g. Killua has an invoice from a supplier, terms, F.O.B. shipping point, but the goods had not arrived as yet.
However, these materials costing P13,400 had been included in the inventory count, but no entry had
been made for their purchase.
h. Merchandise costing P20,000 had been recorded as a purchase but not included as inventory. Terms of
sale are F.O.B. shipping point according to the supplier’s invoice which had arrived by December 31.
Further inspection of the client’s records revealed the following December 31 balances before the above
adjustments: Inventory, P135,000; Accounts Receivable, P63,000; Accounts Payable, P69,000; Sales,
P603,200; Purchases, P315,000; Net income, P72,700.
1. Compute the adjusted balances of Inventory, Accounts Receivable, Accounts Payable, Sales,
Purchases and Net Income.
2. Propose adjusting entries.