The merchandise company NINVENDO, which sells the videogame called “Jocnin”,

provides the following accounting information at November 30:

Accounts Euros
(102) Capital 500,000.00
(570) Banks 856,580.40
(300) Merchandise 28,320.00
(390) Impairment of merchandise 2,400.00
(407) Advances to suppliers 10,000.00
(460) Salary advances 2,300.00
(4700) VAT recoverable 7,120.00
(472) Input VAT 23,769.60
(477) Output VAT 34,400.00
(480) Prepaid expenses 2,200.00
(600) Merchandise purchased 684,070.00
(608) Returns of merchandise purchased 2,470.00
(609) Volume discounts on merchandise purchased 16,460.00
(706) Prompt payment discounts on merchandise sold 16,950.00
(700) Merchandise sold 1,127,100.00
(708) Returns of merchandise sold 600.00
(709) Volume discounts on merchandise sold 59,000.00
(606) Prompt payment discounts on merchandise 8,080.00
purchased

REQUIREMENTS:
A) Journalize the following transactions related to the month of December, and the adjusting
entries for inventories:

1. NINVENDO started the month of December with a beginning inventory of 50 units,

that costed 59.98 euros per unit using the weighted average cost method. During
December, the firm purchased 1,000 units more for 62.50 euros each, plus VAT
(18%). Supplier Airjoc granted a commercial discount, which appeared on the bill,
of 0.50 euros per unit. Advances to suppliers (see the list of accounts above) were
applied, and NINVENDO paid through its bank account to obtain a discount for
prompt payment of 2,000.00 euros. NINVENDO’s transportation costs were
590.00 euros, which already includes VAT of 18%, and they were left unpaid.
2. Sold 750 units of merchandise for 100.00 euros per unit (plus VAT 18%) on
account to its best customer. Besides the usual commercial discount of 10% on
the bill, NINVENDO also granted a volume discount of 5,000.00 euros.
NINVENDO also paid 304.50 euros cash for storage expenses, though the
amount will be finally paid by the customer.
3. By the end of the year, supplier Airjoc granted a volume discount of 2.47 euros
per unit, as previously agreed in case NINVENDO achieved the 12,000 units
purchased over the current year. Due to this discount, Airjoc transferred

1
 34,975.20 euros (which already includes VAT, 18%) to NINVENDO’s bank
account.
4. Net salaries were 10,200 euros, after deducting the salary advances. The
withheld tax payable was 3,480.00 euros. Employees’ portion and firms’s portion
of social security taxes were 6% and 30% of gross salaries, respectively. All
amounts were left unpaid.
5. On December 1, NINVENDO paid 2,640.00 euros for the annual maintenance
(from December 1 to November 30) of its computers. The balance of the account
(480) Prepaid expenses referred to the amount paid last year for the maintenance
until November 30 of the current year.
6. Computed and journalized the VAT balance. NINVENDO left the corresponding
amount unpaid.
7. At the end of the previous year, the market value of the videogames decreased by
5.00 euros per unit. NINVENDO correctly recorded the impairment. However,
during the current year, market conditions changed again and the videogames got
back to their original market value.
8. Final inventories detected 10 units of videogames missing.

B) Prepare the inventory record by using the weighted-average cost method.

C) Compute the cost of goods sold and the gross profit of the current year.
D) Journalize the entries to compute net income, and prepare the income statement.