Selling = Cost + 50% of Cost

750,000 = 150% Cost

750,000/150% Cost
500,000.00 Cost

Selling Price % of cost x sales + % of gross profit x sales

100% cost - 60% of sales + gp -40% of sales
cost 400,000 x 60%
240,000
Problem 10-4
Periodic Perpetual
1 Puchases 800,000 Merchandise Invty 800,000
A/P 800,000 A/P

2 A/P 50,000 A/P 50,000

PRA 50,000 MI

3 A/P 600,000 A/P 600,000

Cash 600,000 Cash

4 A/R 1,580,000 A/R 1,580,000

Sales 1,580,000 Sales

COGS 790,000
MI

5 SRA 40,000 SRA 40,000

A/R 40,000 A/R

MI 20,000
COGS

6 Cash 1,360,000 Cash 1,360,000

A/R 1,360,000 A/R

7 MI 60,000 Inventory Shortage 10,000

Inc & Exp Summary 60,000 MI

COGS 10,000
Inventory Shortage

Requirement #2:
Beginning Balance 90,000 COGS
Add: Net Purchases #4 790,000 #5
Purchases 800,000 770,000
PRA (50,000) 750,000 shortage 10,000
TCGAS 840,000 780,000
Less: Ending Inventory 60,000
COGS 780,000

Merchandise Inventory
Beg 90,000
#1 800,000 #2
#5 20,000 #4
910,000
70,000
60,000
ual

800,000

50,000

600,000

1,580,000

790,000

40,000

20,000

1,360,000

10,000

10,000

OGS
20,000

se Inventory

50,000
790,000
840,000
10,000
 Company A Company B
List Price 500,000 500,000
x (100% - 1st trade discount rate) 80% 65%
x (100% - 2nd trade discount rate) 90%
x (100% - 3rd trade discount rate) 90%
Invoice Price 324000 325000
x (100% - cash discount rate) 98% 98%
Amount to be paid 317520 318500
 Gross Method Net Method
1 Purchases 4,750,000 1 Purchases 4655000
A/P 4,750,000 A/P 4655000

2 Freight In 250,000 2 Freight In 250,000

Cash 250,000 Cash 250,000

3 Total Payment 3,717,000

Payment with discount 1,617,000
Payment beyond discount pd 2,100,000

A/P 1650000 (1,617,000/98%) A/P 1,617,000

Purchase Discount 33,000 Cash 1,617,000
Cash 1,617,000

A/P 2,100,000 A/P 2058000

Cash 2,100,000 Purchase Discount Los 42,000
Cash 2,100,000

A/P Balance
1 4655000
3 -1617000
3 -2058000
Balance, net of discount 980000
Balance, gross of discount 1000000
Purchase Discount Lost 20000

Purchase Discount Los 20000

A/P 20000

5 Purchases 4,750,000 Purchases 4655000

Freight In 250,000 Freight In 250,000
Purchase Discount -33,000
Total 4,967,000 4905000
x 1/5 x 1/5
MI, End 993400 981000

MI, End 993400 MI, End 981000

Income and Expense Summary 993400 Income and Expense Summary 981000

Beg Inventory 0 Beg Inventory 0

Net Purchases 4,967,000 Net Purchases 4,905,000
Cost of Goods Available for Sale 4967000 Cost of Goods Available for Sale 4905000
MI, End 993400 MI, End 981000
Cost of Goods Sold 3973600 Cost of Goods Sold 3924000

Cost of Goods Sold 49600 Purchase Discount Lost 62000

Merchandise Inventory, End 12400
62000
Current Year Income Statement:
Cost of Goods Sold Purchase Discount Lost will
higher by P49,600, thus Net Income increase the G&A Expense by
is lower by P49,600 P62,000 thus NI is lower by
P62,000

Subsequent Year:
Cost of Goods Sold
Beginning Inventory (the ending
inventory of Previous year) is
higher by P12,400, thus, COGS is higher
by P12,400 and Net Income is lower by
P12,400

Assumed figures:
Current Year
Sales 5,000,000 5,000,000
COGS 3973600 3924000
Gross Profit 1,026,400 1,076,000
General and Admin Expense 300,000 (300,000 + PD Lost) 362,000
Distribution Cost 100,000 100,000
Net Income 626,400 614,000

12,400
Next Year: Assuming all other items are the same:
Beg Inventory 993400 Beg Inventory 981000
Net Purchases 3,000,000 Net Purchases 3,000,000
TGAS 3993400 TGAS 3981000
Less: Ending Inventory 700,000 Less: Ending Inventory 700,000
COGS 3,293,400 COGS 3,281,000

Sales 7,000,000 Sales 7,000,000

COGS 3,293,400 COGS 3,281,000
Gross Profit 3,706,600 Gross Profit 3,719,000
General and Admin Expense 400,000 General and Admin Expense 400,000
Distribution Cost 200,000 Distribution Cost 200,000
Net Income 3,106,600 Net Income 3,119,000
 12,400

Total Net Income for 2 years 3,733,000 3,733,000

 Gross Method Net Method
1 MI 1,000,000 1 MI 980000
A/P 1,000,000 A/P 980000

2 A/P 50,000 2 A/P 50,000

Cash 50,000 Cash 50,000

3 A/P 800000 3 A/P 784000

Cash 784000 Cash 784000
MI 16000

4 A/P 150,000 4 A/P 146,000

Cash 149,000 Purchase Disc Lost 3,000
MI 1000 Cash 149,000

5 Cash 1,200,000 5 Cash 1,200,000

Sales 1,200,000 Sales 1,200,000

COGS 688100 COGS 686000

MI 688100 MI 686000
Problem 10-8
Dec 31 Entry Made
Purchases 50,000 Yes
A/P 50,000

Merchandise was not included in invty Not correct; ownership was transferred already; FOB Shipping Point

AJE MI 50,000
Income & Exp Summary 50,000

2 Entry Made
Purchases 75,000 FOB Destination
A/P 75,000 x

AJE A/P 75,000

Purchases 75,000

Not included in MI Yes

3 No entry was recorded for purchases a purchase must be recorded because

on Dec 28 the goods have been shipped and
the freight terms is FOB Shipping

AJE Purchases 30,000

A/P 30,000

AJE MI 30,000
I&E Summary 30,000

4 should not be included in inventory because merchandise has been

returned
AJE Income and Exp Sum 90,000
MI 90,000

5 4-Jan Dec 29 FOB Destination, goods were

Purchases 140,000 received Dec 29
A/P 140,000 Purchases 140,000
A/P 140,000
AJE Purchases 140,000
A/P 140,000
ready; FOB Shipping Point