PERPETUAL INVENTORY SYSTEM (ACTIVITY)

PROBLEM SOLVING: MERCHANDISING PROBLEM (PERPETUAL INVENTORY SYSTEM)

The Riego Hardware Store was organized on May 1 of the current year by Mr. Percival Archer Riego engaged in a
whole sale trading business. The transactions for the month of May & chart of accounts are as follows:

May 1 Mr Riego invested P800, 000 cash in his business.

3 Purchased merchandise on account from MERC Trading P195, 000, terms: 2/15, n/30, FOB Shipping
point.
4 Bought the following on cash: Computer Equipment P5, 000 & Supplies P3, 000.
5 Sold merchandise on cash P20, 000. The goods cost P7, 000.
6 Sold merchandise on cash amounting P60, 000. The merchandise cost was P35, 000.
7 Received the merchandise and bill for the shipping of P1, 000 from 2Go Shipping Company.
8 Sold merchandise on account P44, 500. The goods cost P22, 540.
9 Received a P5, 000 credit memo from MERC Trading for a return of defective merchandise.
10 Sold merchandise on account to Zeus Company P200, 000, FOB Destination, terms: 3/10. The goods
was P75, 000.
12 Paid transportation P2, 000 on May 10 sales.
14 Sold merchandise on cash to J.A Company P50, 000. The cost of goods was 35, 000.
15 Paid salaries P20, 000.
16 Made a refund amounting P4, 000 on May 6. The goods valued at P2, 000.
17 Purchased furniture worth 25, 000 in cash from Elizalde Woods & Crafts.
18 Made a full payment to MERC Trading.
20 Collected the account due from Zeus Company.
21 Bought merchandise from Montefalco Wholesaler P75, 000, FOB Shipping Point, terms: 2/10, n/30.
23 Borrowed money from BDO signed a promissory note for P15, 000.
25 Paid freight on May 21 purchased, P1, 000.
28 Mr Riego got cash P5, 000 from the business.
30 Paid Montefalco Wholesaler P55, 000. No discount allowed on partial payment.
31 Paid the following: Advertising P5, 000, Utilities P2, 000, Salaries P20, 000, Rent P6, 000, Insurance
P2, 000
Chart of Accounts:
100 CASH, 105 ACCOUNTS RECEIVABLE, 110 MERCHANDISE INVENTORY, 115 SUPPLIES,
120 FURNITURE & FIXTURES, 125 EQUIPMENT, 200 ACCOUNTS PAYABLE, 205 NOTES PAYABLE
300 RIEGO CAPITAL, 305 RIEGO DRAWINGS, 400 SALES, 405 SALES RETURNS AND ALLOWANACES
410 SALES DISCOUNT, 500 SALARIES EXPENSE, 505 ADVERTISING EXPENSE, 510 RENT EXPENSE
515 UTILITIES EXPENSE, 520 INSURANCE EXPENSE, 525 FREIGHT OUT, 530 COST OF GOODS SOLD
600 INCOME SUMMARY

Required:
1. Journal Entries
2. Ledger
3. Trial Balance
4. Statement of Performance
5. Statement of Equity
6. Statement of Financial Position
7. Statement of Cash Flows
8. Closing Entries
9. Post – Closing Trial Balance