Illustrative Problem 1

Case Problem: DOLE DISTRIBUTOR

April 01 The business DOLE DISTRIBUTOR was registered as single proprietorship with the
Department of Trade and Industry, Juan Lopez invested P39, 000

02 Bought computer equipment for P10,000 cash

/ Bought merchandise on account from LOWTOWN Supply Co. P15, 900, Term, 2/10, n/30

03 Bought office supplies on cash basis for P700

04 Sold merchandize on account P15,200 FOB Destination, terms 2/10, n/30 (Cost of
Merchandise P11,000)

05 Paid P200 freight on April 4 sale

06 Received credit memo LOWTOWN Supply Co. for merchandise return P300

11 Paid LOWTOWN

13 Collected from April 4 customers

14 Bought merchandise on cash basis for P14,400

15 Salaries paid P1,500

16 Borrowed money from RCBC Bank, signed a promissory note for P12,000

17 Received refund from a supplier on cash purchase of April 14, P500

18 Bought merchandize from MESDA, P14,200 FOB Shipping, term, 2/10, n/30

20 Paid freight on April 18 purchase P700

23 Sold merchandise for P16, 400 (Cost of merchandise P12,000)

26 Bought merchandise for cash P12,300

27 Paid MESDA on April 18 purchase, P9,000. No discount allowed on partial payment

28 J. Lopez get cash from the business, P2,008

29 Made refund to cash customer for defective merchandise, P900

30 Sold merchandise on account, P13,700 2/30 (Cost of merchandise P9,000)

Paid the following: Advertising P1,000, Utilities P400, Rent P3,500, Salaries P1,500
General Journal 1

Date Accounts Title and Explanation PR Debit Credit

April 1 Cash 101 39,000
Lopez, Capital 301 39,000
To record initial investment

2 Computer equipment 10,000

cash 10,000

/ Merchandise inventory 15,900

Accounts payable 15,900

3 Office supplies 700

cash 700

4 Accounts receivable 15,200

sales 15,200

Cost of Merchandise 11,000

Merchandise Inventory 11,000

5 Freight out 200

cash 200

6 Accounts payable 300

Merchandise Inventory 300

11 Accounts payable 15,600

Cash 15,288
Purchase discount 312

13 Cash 14,896
Sales Discount 304
Merchandise Inventory 15,200

14 Merchandise Inventory 14,400

cash 14,400

15 Salaries expense 1.500

cash 1,500

16 Cash 12,000
Notes payable 12,000
General Journal 2

Date Accounts Title and Explanation PR Debit Credit

April 17 Cash 500
Merchandise Inventory 500

18 Merchandise Inventory 14,200

Accounts payable 14,200

20 Merchandise Inventory 700

Cash 700

23 Cash 16,400
Sales 16,400

Cost of Merchandise 12,000

Merchandise Inventory 12,000

26 Merchandise Inventory 12,300

Cash 12,300

27 Accounts payable 9,000

cash 9,000

28 J. Lopez, Drawing 2,008

Cash 2,008

29 Sales return and allowances 900

cash 900

30 Accounts receivable 13,700

Sales 13,700

Cost of Merchandise 9,000

Merchandise Inventory 9,000

Advertising expense 1,000

Utilities expense 400
Rent expense 3,500
Salaries expense 1,500
cash 6,400
 Income summary 41,304
Advertising expense 1,000
Utilities expense 400
Rent expense 3,500
Salaries expense 3,000
Freight Out 200
Cost of Goods Sold 32,000
Sales Discount 304
Sales Return and allowances 900

Sales 45,300
Income summary 45,300

J.Lopez, Capital 2,008

J. Lopez Drawing 2,008

Income Summary 3,996

J.Lopez, Capital 3,996

101 Cash

Date Explanation Debit Credit Balance

debit credit
Apr1 GJ-1 39,000 39,000
2 GJ-1 10,000 29,000
3 GJ-1 700 28,300
5 GJ-1 200 28,100
11 GJ-1 15288 12,812
13 GJ-1 14,896 27,708
14 GJ-1 14,400 13,308
15 GJ-1 1,500 11,808
16 GJ-1 12,000 23,808
17 GJ-2 500 24,308
20 GJ-2 700 23,608
23 GJ-2 16,400 40,000
26 GJ-2 12,300 27,708
27 GJ-2 9,000 18,708
28 GJ-2 2,008 16,700
29 GJ-2 900 15,800
30 GJ-2 6,400 9,400
102 Accounts Receivable

Date Explanation PR Debit Credit Balance

debit credit
Apr4 GJ-1 15,200 15200
13 GJ-1 15200 0
30 GJ-2 13700 13,700

104 Supplies

Date Explanation Debit Credit Balance

debit credit
Apr3 700 700

105 Equipment

Date Explanation PR Debit Credit Balance

debit credit
Apr2 GJ-1 10,000 10,000

201 Accounts Payable

Date Explanation Debit Credit Balance

debit credit
Apr 2 GJ-1 15,900 15,900
6 GJ-1 300 15,600
11 GJ-1 15,600 0
18 GJ-2 14,200 14,200
27 GJ-2 9,000 5,200

202 Notes Payable

Date Explanation PR Debit Credit Balance

debit credit
Apr16 GJ-1 12,000 12,000
301 Lopez, Capital

Date Explanation PR Debit Credit Balance

debit credit
Apr1 GJ-1 39,000 39,000
30 GJ-2 3,996 42,996
GJ-2 2,008 40,988

302 Lopez, Drawing

Date Explanation PR Debit Credit Balance

debit credit
Apr28 GJ-2 2,008 2,008
30 GJ-2 2,008 0

401 Sales

Date Explanation PR Debit Credit Balance

debit credit
Apr4 GJ-1 15,200 15,200
22 GJ-2 16,400 31,600
30 GJ-2 13,700 45,300
30 GJ-2 45,300 0

402 Sales Discount

Date Explanation PR Debit Credit Balance

debit credit
Apr13 GJ-1 304 304
30 GJ-2 304 0

403 Sales Returns and Allowances

Date Explanation PR Debit Credit Balance

debit credit
Apr29 GJ-1 900 900
30 GJ-2 900 0
501 Freight Out

Date Explanation Debit Credit Balance

debit credit
Apr GJ-1 200 200
30 GJ-2 200 0

502 Advertising Expense

Date Explanation PR Debit Credit Balance

debit credit
Apr30 GJ-2 1,000 1,000
30 GJ-2 1,000 0

503 utilities Expense

Date Explanation Debit Credit Balance

debit credit
Apr30 GJ-2 400 400
30 GJ-2 400 0

503 Rent expense

Date Explanation Debit Credit Balance

debit credit
Apr30 GJ-2 3,500 3,500
30 GJ-2 3,500 0

504 Salaries Expense

Date Explanation PR Debit Credit Balance

debit credit
Apr15 GJ-1 1,500 1,500
30 GJ-2 1,500 3,000
30 GJ-2 3,000 0
______ Income Summary

Date Explanation Debit Credit Balance

debit credit
Apr30 GJ-2 45,300 45,300
GJ-2 32,000 13,300
GJ-2 9,304 3,996
GJ-2 3,996 0

601 Cost of Goods Sold

Date Explanation PR Debit Credit Balance

debit credit
Apr 4 GJ-1 11,000 11,000
23 GJ-2 12,000 23,000
30 GJ-2 9,000 32,000
30 GJ-2 32,000 0

103 Merchandise Inventory

Date Explanation PR Debit Credit Balance

debit credit
Apr2 GJ-1 15,900 15,900
4 GJ-1 11,000 4,900
6 GJ-1 300 4,600
11 GJ-1 312 4,288
14 GJ-1 14,400 18,688
17 GJ-2 500 18,188
18 GJ-2 14,200 32,388
20 GJ-2 700 33,088
23 GJ-2 12,000 21,088
26 GJ-2 12,300 33,388
30 GJ-2 9,000 24,388
 Dole Distributor
Trial Balance
April 30, 20xx

Acct. No. Accounts Title Debit Credit

101 Cash P 9,400
102 Accounts receivable 13,700
103 Supplies 700
104 Merchandise Inventory 24,388
104 Equipment 10,000
201 Accounts payable P 5,200
202 Notes payable 12,000
301 J.Lopez, Capital 39,000
302 J.Lopez, Drawing 2,008
401 Sales 45,300
402 Sales discount 900
403 Sales return and allowances 304
501 Freight out 200
502 Advertising expense 1,000
503 Utilities expense 400
504 Rent expense 3,500
505 Salaries expense 3,000
506 Cost of Merchandise 32,000

Balance: P 101,500 P 101,500

 Dole Distributor
Statement of Financial Performance
April 30, 20xx

Sales 45,300
Less: sales return and allowances 900
Sales discount 304 (1,204)
Net sales 44,096
Less: cost of goods sold (32,000)
Gross Profit 12,096
Less Expenses
Rent expense 3,500
Utilities expense 400
Salaries expense 3,000
Advertising expense 400
Freight Out 200 (8,100)
Net Income 3,996

Dole Distributor
Statement of Changes in Equity
April 30, 20xx

J. Lopez Capital, Beginning 39,000

Add: net income 3,996
Total 42,996
Less: J.Lopez Drawiing (2,008)
J.Lopez Capital, ending 40,988
 Dole Distributor
Statement of Financial Position
April 30, 20xx

ASSETS
Cash 9,400
Accounts receivable 13,700
Merchandise Inventory 24,388
Supplies 700
Equipment 10,000
TOTAL ASSETS 58,188

LIABILITIES
Accounts payable 5,200
Notes payable 12,000

EQUITY
J.Lopez, Capital 40,988
TOTAL LIABILITIES AND EQUITY 58,188
 Dole Distributor
Statement of Cash Flow
April 30, 20xx

Cash Flow from operating activities

Payment for supplies (700)
Payment for freight out (200)
Payment for creditors (15,288)
receive from customer account 14,896
Payment for merchandise purchased (14,400)
Payment for salaries (1,500)
Payment for freight in (700)
Payment for Merchandise purchased (12,300)
Payment for creditor (9000)
Cash received from purchase return 500
Cash received from merchandise sold 16,400
Payment for Cash refund to customer (900)
Payment of various expenses (6,400)
NET CASH PROVIDED BY OPERATING ACTIVITIES (29,592)

Cash Flow from investing activities

Cash payment of Equipment (10,000)
Cash load from bank 12,000
NET CASH PROVIDED BY INVESTING ACTIVITIES 2,000

Cash Flow from financing activities

Cash investment of owner 39,000
Payment for owner’s withdrawal 2,008
NET CASH PROVIDED BY FINANCING ACTIVITIES 36,992

TOTAL CASH P 9,400

 Dole Distributor
Post-closing Trial Balance
April 30, 20xx

Acct. No. Accounts Title Debit Credit

101 Cash P 9,400
102 Accounts receivable 13,700
103 Supplies 700
104 Equipment 10,000
105 Merchandise Inventory 24,388
201 Accounts payable P 5,200
202 Notes payable 12,000
301 J.Lopez, Capital 40,988

BALANCE 58,188 58,188