Name: Course, Year & Section:

Date: Score:

ACTIVITY 1-1

Fill in the blanks

1. In the periodic inventory system, all purchases of merchandise during the period is recorded
in the ____________________account.

2. A continuous record of inventory is kept in a _____________________system.

3. When using the periodic system, ___________________ will remain unchanged.

4. ____________________represents a liability on the balance sheet and records money

received for a sale of service not yet performed.

5. Transportation in is _____________ to the cost of goods sold.

6. Net sales less cost of sales equals___________________.

7. Net purchases equals Purchases less ________________________and ________________.

8. Sales returns and allowances are used in calculating_________________.

9. Ending inventory represents goods not _______________________.

10. Gross profit less_______________________ equals profit.

Name: Course, Year & Section:

 Date: Score:

ACTIVITY 1-2 TRUE OR FALSE

__________1. When merchandise inventory is purchased with credit terms of 2/10, n/60, the
credit period is 60 days from date of the invoice.

__________2. Merchandise purchased on June 8 with credit terms of 2/10, n/30, must be paid
sooner than with credit terms of n/10 EOM.

__________3. An inventory system in which the business has up-to-date data as to the quantity
of goods on hand is called a periodic inventory system.

__________4. A deduction allowed from the invoice price of goods if payment is made within a
specified period of time is called a trade discount.

__________5. Merchandise with a list price of P100, subject to a trade discount of 40 percent
and sold with credit terms of 2/10, n/60, would cost the buyer P58.80 if payment is made within
the discount period.

__________6. When goods are shipped under freight terms of FOB shipping point (FOB
factory), the buyer of the goods pays the freight charges.

__________7. The cost of goods sold is determined by adding the cost of purchases to the
beginning merchandise inventory and subtracting the ending merchandise inventory.

__________8. In a periodic inventory system, transportation charges for merchandise are added
to net purchases to determine the cost of goods purchased.

__________9. In a perpetual inventory system, transportation charges are recorded with a debit
to the merchandise inventory account.

__________10. Transportation-In, Freight-In, and Delivery Expense are all the same account.
__________11. If net sales for the business totals P150,000, gross profit is P65,000, and net
income is P40,000, then the cost of goods sold will total P25,000.

__________12. The income statement for the period shows a net loss for the year of P4,500.
When the closing entries are prepared, this net loss will be closed into the Capital account of a
proprietorship business with a debit to the Income Summary account and a credit to the Capital
account.
__________13. Merchandise with a list price of P2,000 is sold with a trade discount of 30% and
cash terms of 2/10, n/30. If the merchandise is paid for within the discount period, the total cost
will be P1,372.
__________14. Merchandise is purchased FOB shipping point. The seller will pay the freight
charges.
__________15. The ending inventory of one period is the beginning inventory of the next period.

ACTIVITY 1-3

1. On June 1, 2019, a company sold merchandise with a P120,000 list price

Trade Discount Credit Terms Date Paid

a 30% 2/10;n/30 June 8
b 40% 1/10; n/30 June 15
c. - 2/10; n/30 June 11
d. 20% 1/15;n/30 June 14
e. 40% n/30 June 28

Requirements: For each of the sales terms, determine the following

1. amount of sale recorded 2.
amount of cash received

Answer:
Sales Recorded Cash received
A
B
C
D
E

ACTIVITY 1-4

On May 15, 2019 ABC Company acquired goods from XYZ Company with a list price of
P100,000. XYZ Company allowed 10% trade discount and offered 2/10;n/30 credit term. ABC
Company paid in full on May 20.

Required: Prepare the necessary journal entries for XYZ Company.