INVENTORIES

You observed the physical inventory of goods in the warehouse on December 31, 2020
and were satisfied that it was properly taken. Shown below are portions of the company’s Sales
and Purchase ledger accounts:
Sales
Date Reference Amount
12/28/2020 SI No. 835 P 25,680
12/28/2020 SI No. 836 14,196
12/28/2020 SI No. 837 11,439
12/31/2020 SI No. 839 65,436
12/31/2020 SI No. 840 81,122
12/31/2020 SI No. 841 76,434
(SI = Sales Invoice)

Purchases
Date Reference Amount
12/28/2020 RR No. 949 P 14,500
12/30/2020 RR No. 951 26,700
12/31/2020 RR No. 952 34,550
12/31/2020 RR No. 953 14,675
(RR = Receiving Report)

When performing a sales and purchases cutoff test, you found the following:
a. All receiving report and sales invoices are prepared in strict numerical sequence.
b. The last receiving report number used in calendar year ended December 31, 2020 is
RR. No. 953
c. The sale invoice number corresponding to the last shipment made in 2020 is SI No.
838.

You also obtained the following additional information:

1. Included in the physical count at December 31 were inventories costing P25,000 that
have been purchased and received on RR No.950. As of December 31, 2020, no
vendor invoice has been received for these inventories.

2. There were goods located in the shipping area of MLD Corporation on December 31,
2020, but were not included in the physical count. These had been sold to LLD co. who
had already paid for the goods. The goods were picked up by LLD Co’s truck on
January 3, 2021. The sale was recorded on SI No. 835.

3. At the close of business on December 31, 2020, there were two box cars standing on
MLD Coporation’s siding:
 a) Boxcar 14344AA was unloaded on January 2, 2021. The receiving report for
this merchandise
is RR No.953. The freight was paid by the vendor.

b) Boxcar 02126RR was loaded and sealed on December 31, 2020. The car
was taken from
MLD’s Corporation siding on January 2, 2021. It contained a shipment of
goods to CCC Co.
and was covered by SINo. 838. The sales price for this order was P65,000,
and transportation
charges were to be paid by CCC Co.

4. Temporarily stranded on a distant railroad siding at December 31, 2020, was a boxcar of
inventories en route to FFF Company. This was covered by SI No. 836. The terms of
this shipment were FOB destination.

5. Goods in transit from a vendor at December 31, 2020, were received on RR No. 954.
The terms of this shipment were FOB destination. Freight charges of P1,500 were paid
by MLD Corporation. However, this P1,500 freight charge was deducted from the
purchase price of P16,800.

Adjusting Journal Entries

1. Sales 222,992

Accounts Receivable 222,992

SI NO. 839 65, 436

SI NO. 840 81, 112

SI NO. 841 76,434

222,992

2. Cost of Sales 25,000

Accounts Receivable 25,000

3. Inventory 14,675

Cost of sales 14, 675

4. Inventory 65, 000

Cost of sales 65, 000

5. Sales 14, 196

 Accounts Receivable 14, 196

6. Inventory 14,196

Cost of sales 14,196

Debit(Credit)

AJE Sales Accounts Receivable Cost of Sales Accounts Payable Inventory

1 222,992 (222,292)

2 25,000 (25,000)

3 (14,675) 14,675

4 (65,000) 65,000

5 14,196 (14, 196)

6 (14,196) 14, 196

236,188 237,188 (68,871) (25,000) 93, 871