1.

Prepare journal entries to record the following merchandising transactions for both the seller
(Bobby) and buyer (Kitty).

May 4 - Bobby sold P1,500 of merchandise on account to Kitty, terms FOB shipping point, n/45,
invoice dated May 4. The cost of the merchandise was P900.
May 6 - Kitty paid transportation charges of P30 on the May 4 purchase from Bobby.
May 8 - Bobby sold P1,000 of merchandise on account to Kitty, terms FOB destination, n/30,
invoice dated May 8. The cost of the merchandise was P700.
May 10 – Bobby paid transportation costs of P50 for delivery of merchandise sold to Kitty on
May 8.
May 16 – Bobby issued Kitty a P200 credit memorandum for merchandise returned. The
merchandise was purchased by Kitty on account on May 8. The cost of the merchandise returned
was P140.
May 18 - Bobby received payment from Kitty for purchase of May 8.
May 21 - Bobby sold P2,400 of merchandise on account to Kitty, terms FOB shipping point,
2/10,
N/EOM. Bobby prepaid transportation costs of P100, which were added to the invoice. The cost
of the merchandise was P1,440.
May 31 - Bobby received payment from Kitty for purchase on May 21, less discount.

2. Practice Exercise
Purchases
Oct 6 2,000 units Bought at 10.30 each
Oct 27 2,700 units Bought at 10.71 each
Sales
Oct 7 2,500 units Sold at 25 each
Oct 31 4,200 units Sold at 25 each
Assuming your beginning inventory is P28,500 for 3,000 units, find the total COGS for the
month of October under:
• FIFO Method
• Weighted Average (Perpetual)

3. Cost of Inventory Homework

Oops Company provided you with the information regarding their accounts on the beginning of
the month of June 2018.
Cash - 500,000
Accounts Receivable - 100,000
Supplies - 150,000
Merchandise Inventory - 40,000 (100 units at P400)
Accounts Payable - 50,000
Notes Payable - 240,000
Jenny, Capital - 500,000

The following took place during the month.

1. Purchased on June 3, 50 units at P420
 2. Purchased on June 13, 70 units at P410
3. Purchased on June 15, 100 units at P400
4. Sold 120 units on June 7
5. Sold 110 units on June 22
6. The following expenses were incurred, but remained unpaid for the month
a. Rent, P10,000
b. Salaries, P20,000
c. Utilities, P10,000
d. Interest, P2,000
e. Supplies used, P50,000
7. The selling price is 50% above cost

Required: Prepare the journal entries and the multistep income statement of Oops
Company for the month ending June
• using FIFO
• using Weighted Average

4. Buttman & Rovin’ Inc. uses a weighted average inventory system. Its purchase and sales
transactions for the month of November are listed below:
Nov 1 - Beg. Inv: 1,500 plushies, P112,500
Nov. 2 - Purchased 2,100 plushies, P166,950
Nov 7 - Sold 1,400 units of plushies for P1425 each
Nov 10 - Sold 1,900 units of plushies for P1395 each
Nov 13 - Purchased 3,650 units of plushies, P290,175
Nov 21 - Purchased 1,800 units of plushies, P144,000
Nov 30 - Sold 4,750 units of plushies for P1,380 each
Compute for the (a) Cost of Goods Sold and (b) Gross Profit to be reported in the financial
statements of Asset Corgi for the month of November. (5pts)

5. Inka Jinka gives you the following information relating to is inventory

Inventory, beginning P492,000
Gross Purchases 950,000
Purchase discounts 35,000
Freight – in 20,000
Freight – out 35,000
Cash sales 636,000
Accounts Receivable, January 1 116,000
Accounts Receivable, December 31 176,000
Collections of Accounts Receivable during 2017 436,000
Sales returns and allowances (allowances are 30%) 40,000
Sales discounts 20,000
Inventory consigned by Sheep Luca 30,000
What is the estimated cost of ending inventory if the gross profit rate of sales 25%? (5pts)
6. Kuzon Inc. reported a net income of P200,000, P250,000 and P180,000 in 2015, 2016, 2017,
respectively. However, upon checking, the accountant found the following inventory errors:
• Beginning Inventory in 2016 was overstated by P30,000.
• Beginning Inventory of 2017 was understated by P20,000.
• Ending Inventory in 2017 was understated by P25,000.
Compute for the corrected net income for 2015-2017. (6pts)

7. Reconciliation of Ken Tucky Corp.’s bank account at January 31 is as follows:

Balance per bank statement P 2,155,000
Deposits outstanding 300,000
Checks outstanding ( 50,000)
Correct cash balance P 2,405,000

Balance per book P 2,407,000

Bank service charge ( 2,000)
Correct cash balance P 2,405,000

February data are as follows:

Bank Depositor
Checks recorded 2,350,000 2,485,000
Deposits recorded 1,616,000 1,875,000
Collection by bank (w/ interest of 18,000) 418,000
NSF Check 15,000
Balances 1,944,000 1,915,000

• How much is deposit in transit at February 28? ___________________

• How much is outstanding checks at February 28? _________________
• How much is the adjusted cash balance at February 28? _____________

8. John Paul Company banks with World Bank and prepares a reconciliation of the bank and
book balances on a regular basis. The April 31, 2013 reconciliation shows a balance per bank of
P581,050, balance per books of P627,000, outstanding checks of P84,300, deposit in transit of
P120,000, interest earned on the bank balance of P1,250, and service charges of P400. Included
in the bank statement was a cancelled check that the company failed to record. The check was in
payment of bank loan. Determine the amount of unrecorded check issued by the company in
payment of bank loan

9. In 2012, Joey Company reported a net realizable value of P680,000 for its Accounts
Receivable. The ending balance of the Allowance for Doubtful Accounts amounted to P120,000.
During the year 2013, total sales amounted to P3,600,000, a third of which was on credit. A
P80,000 receivable was also written off in 2013, while P40,000 was recovered during the same
year. Collections during the year (excluding recovery) amounted to P500,000.
• How much is the ending accounts receivable?
• If the percentage of A/R method is used, how much is the 2013 ending balance of
the Allowance for Doubtful Accounts? (Assume a 10% rate)
 • How much is the net realizable value for accounts receivable at the end of 2013?

10. In the month of July, notice was received by AVPAM Co. that its client, Mr. Henry had
become insolvent. The company thus wrote off his outstanding account of P5,200. Write-offs of
receivables owed by other defaulting clients had previous to this already amounted to P11,600.
When Mr. Henry recovered from an insurance claim, he gave P2,500 to the company but could
not promise to pay the rest. Estimated uncollectibles of the company using the Aging of
Receivables for the month ending December 31 amounted to P8,500. If the Allowance for
Doubtful Accounts at the end of June reported a balance of P4,100, what amount of bad debts
expense should AVPAM Co. report in the July income statement?