SERVICE

CPA Company
Statement of Profit or Loss
For the Year Ended ______

Revenues from Services PXXX

Less: Expenses XXX
Profit PXXX

MERCHANDISING

CPA Company
Statement of Profit or Loss
For the Year Ended ______

Gross Sales PXXX

Less: Sales Returns and Allowances PXXX
Sales Discounts XXX XXX
Net Sales XXX
Cost of Sales
Merchandising Inventory, beg XXX
Purchases PXXX
Less: Purchase Returns and
Allowances PXXX
Purchase Discounts XXX XXX
Net Purchases XXX
Transportation In XXX
 Net Cost of Purchases XXX
Goods Available for Sale XXX
Less: Merchandising Inventory, end XXX
Cost of Sales XXX
Gross Profit XXX
Less: Operating Expenses XXX
Operating Income XXX
Less: Finance Costs XXX
Profit PXXX

SOURCE DOCUMENTS:
1. Sales Invoice
2. Bill of Lading
3. Statement of Account
4. Official Receipt
5. Deposit Slip
6. Check
7. Purchase requisition
8. Purchase Order
9. Receiving Report
10. Credit Memorandum
TRANSPORTATION COSTS

SHOULDER
S
Freight Terms PAYS the shipper
transportatio
n costs

Seller FOB Destination, Freight Prepaid Seller SDPS

 FOB Destination, Freight Collect Buyer
FOB Shipping Point, Freight Prepaid Seller
Buyer
FOB Shipping Point, Freight Collect Buyer BSCB

TRANSFER OF
OWNERSHIP
1. FOB Destination, upon received by the buyer
2. FOB Shipping Point, when delivers to the buyer
2. FOB Shipping Point, when delivers
TERMS OF TRANSACTIONS to the buyer
1. Trade Discount
>encourage the buyers to purchase products because of markdowns from the list
price
>NO trade discount account and NO ENTRY to be made
>It is used in computing the invoice price

2. Cash Discounts Credit Terms: 20, 2/10, n/30

> it encourages prompt payment

Example 1:
On June 1, 2019, Park Shin Forest Products sold merchandise with a
P240,000 list price

Trade Credit
Discount Terms Date Paid
A 30% 2/10, n/30 08-Jun-19
B 40% 1/10, n/30 15-Jun-19
C - 2/10, n/30 11-Jun-19
D 20% 1/15, n/30 14-Jun-19
E 40% n/30 28-Jun-19

Required:
a. Compute the amount to be recorded as a
sale
b. Compute the amount of cash received
c. Provide the journal entry to record the purchase and
payment.

A B C D E
PHP PHP PHP PHP PHP
List Price 240,000 240,000 240,000 240,000 240,000
Less: Trade
Discount 72,000 96,000   48,000 96,000
Invoice
Price/Sales 168,000 144,000 240,000 192,000 144,000
Less: Cash
Discount 3,360 4,800 1,920
PHP PHP PHP PHP PHP
Cash Received 164,640 144,000 235,200 190,080 144,000

Entry to record purchase:

June 1, 2019

01-Jun-
A 19 Accounts Receivable 168,000

Sales 168,000

08-Jun- PHP
19 Cash 164,640

Sales Discount 3,360

Accounts Receivable 168,000

01-Jun-
B 19 Accounts Receivable 144,000
Sales
 144,000

15-Jun- PHP
19 Cash 144,000
PHP
Accounts Receivable 144,000

01-Jun-
C 19 Accounts Receivable 240,000

Sales 240,000

11-Jun- PHP
19 Cash 235,200

Sales Discount 4,800

Accounts Receivable 240,000

01-Jun-
D 19 Accounts Receivable 192,000

Sales 192,000

14-Jun- PHP
19 Cash 190,080

Sales Discount 1,920

Accounts Receivable 192,000

01-Jun-
E 19 Accounts Receivable 144,000

Sales 144,000

28-Jun- PHP
19 Cash 144,000

Accounts Receivable 144,000

 Example 2:

On May 15, 2020, Kim Tan Book Distributors acquired for resale books on account with a list
price of P108,000. Lee Publishing, the supplier, allowed a 15% trade discount as well as credit
terms of 2/10, n/30. Tan paid the invoice in full on May 20, 2020.

Required: Prepare journal entries for Kim Tan 10800

Book Distributors List Prices 0
Less: Trade
Discount 16200
Entry to record purchases Purchases 91800
Purchases 91800
Accounts Payable 91800

Entry to record payment

Accounts Payable 91800

Purchases Discount 1,836

Cash 89,964

Example 3:

Purchases Shipping Terms Prepaid Freight Credit Memo

FOB Shipping
A 12,000 Point 1,000 3,000

B 24,000 FOB Destination 2,400 2,000

FOB Shipping
C 28,000 Point 4,000
FOB Shipping
D 40,000 Point 3,000

Required: Assume that credit terms are 2/10, n/30

a. Determine the cash discount
b. Determine the cash remitted if payment is made within the discount period.
 A B C

Purchases 12,000 24,000 28,000

Less: Purchases Returns & Allow. 3,000 2,000 4,000

Net Purchases before C.D. 9,000 22,000 24,000

Less: Cash discount 180 440 480

Net Purchases 8,820 21,560 23,520

Freight/Transpo Costs 1,000

Cash remitted/cash payment 9,820 21,560 23,520

A. Purchases 12,000
Accounts Payable 12,000

Accounts Payable 3,000

Purchases Returns and Allow. 3,000

Freight in 1,000

Accounts Payable 1,000

PROBLEM #8
2021
200,00
Oct. 6 Purchases 0
200,00
Cash 0

700,00
Oct. 12 Purchases 0
700,00
Accounts Payable 0

Oct. 15 Accounst Payable 50,000

Purchases Returns and Allow 50,000

Oct. 17 Accounts Payable 650,00

 0
Purchases Discount 19500
630,50
Cash 0

Oct. 19 Freight in 7,000

Cash 7,000

Problem # 5 BUYER

A B C D E

224,000. 90,000. 41,000. 357,000.

List Price 00 126,000.00 00 00 00

Less: Trade 67,200.0 10,250. 71,400.0

discount 0 25,200.00 00 0
Invoice
Price/Purchas 156,800. 90,000. 30,750. 285,600.
es 00 100,800.00 00 00 00

21,000.0 7,000.0 9,000.0 24,000.0

Less: PRA 0 0 0 0
Net
purchases 135,800. 83,000. 21,750. 261,600.
(after PRA) 00 100,800.00 00 00 00

Less: Cash 1,660.0

Discount 2,716.00 1,008.00 0 7,848.00

Net 133,084. 81,340. 21,750. 253,752.

Purchases 00 99,792.00 00 00 00
Add:
Transporatio 2,000.0 1,000.0
n In 4,000.00 0 0
Amount
needed to
settle each 137,084. 83,340. 22,750. 253,752.
purchase 00 99,792.00 00 00 00

Problem # 9 BUYER

1. F.O.B. Shipping Point

 10-Mar-21 Purchases 18000
Accounts Payable 18000

12-Mar-21 Freight in 360

Cash 360

15-Mar-21 Accounts Payable 2000

Purchases Returns and Allowances 2000

19-Mar-21 Accounts Payable 16000

Cash 15840
Purchases Discount 160

2. F.O.B. Destination
10-Mar-21 Purchases 18000
Accounts Payable 18000

12-Mar-21 Accounts Payable 360

Cash 360

15-Mar-21 Accounts Payable 2000

Purchases Returns and Allowances 2000

19-Mar-21 Accounts Payable 15640

Cash 15480
Purchases Discount 160

Problem # 6 SELLER
 01-Jun Cash 180000
Sales 180000

04-Jun Accounts Receivable 650000

Sales 650000

07-Jun Sales Returns and Allow. 90000

Accounts Receivable 90000

10-Jun Cash 548800

Sales Discount 11200
Accounts Receivable 560000

Problem # 7 SELLER

08-Jun-21 Accounts Receivable 16000

Sales 16000

12-Jun-21 Sales Returns and Allow. 4000

Accounts Receivable 4000

18-Jun-21 Cash 11760

Sales Discount 240
Accounts Receivable 12000

Problem # 18
Gross Sales
Less: Sales Returns and Allowances
Sales Discounts
Net Sales
Cost of Sales
120000
Merchandising Inventory, beg 0
430000
Purchases 0
Less: Purchase Returns and Allowances 129000
Purchase Discounts 215000 344000
395600
Net Purchases 0
Transportation In 172000
412800
Net Cost of Purchases 0
532800
Goods Available for Sale 0
190000
Less: Merchandising Inventory, end 0
342800
Cost of Sales 0
Gross Profit

Problem # 19

Cost of Sales
Merchandising Inventory, beg 300000
Purchases 1320000
Less: Purchase Returns and Allowances 46200
Purchase Discounts 26400 72600
Net Purchases 1247400
Transportation In 39600
Net Cost of Purchases 1287000
Goods Available for Sale 1587000
Less: Merchandising Inventory, end
(LOST) 327000
Cost of Sales 1260000

Problem # 20
 1 2 3 4 5
Net Sales 120000 180000 250000 290000 400000
Cost of Sales:
Merchandising Inventory, beg 30000 50000 70000 40000 120000
Add: Net Cost of Purchases 80000 110000 190000 160000 390000
Goods Available for Sale 110000 160000 260000 200000 510000
Less: Merchandising Inventory, end 40000 20000 30000 70000 130000
Less: Cost of Sales 70000 140000 230000 130000 380000

Gross Profit 50000 40000 20000 160000 20000