MEC 12 FINANCIAL ACCOUNTING & REPORTING

PRACTICE PROBLEM (ACCOUNTING FOR MERCHANDISING BUSINESS)

Listed below are the February 1, 2021 account balances of Teresita Buenaflor Shoes:

Account Title Debit Credit

Cash PHP 33,000
Accounts Receivable 192,000
Merchandise Inventory 413,000
Supplies 51,000
Prepaid Insurance 48,000
Land 460,000
Building 1,750,000
Accumulated Depreciation- Building PHP 350,000
Equipment 2,310,000
Accumulated Depreciation - Equipment 630,000
Accounts Payable 108,000
Mortgage Payable 2,600,000
Buenaflor, Capital 1,569,000
PHP 5,257,000 PHP 5,257,000

During the month of February 2021, the following are the transactions occurred:

February 1. Collected PHP 113,000 from customers on account.

February 2. Paid PHP 64,000 of accounts due less discounts of 3%.
February 4. Purchased merchandise, PHP 170,000. Terms: FOB Shipping Point; 3/10, n/30.
February 5. Sold merchandise on account to Gonzales Inc., PHP 720,000. Terms: FOB Shipping Point; 2/10, n/30.
February 7. Paid for advertising for the month of February, PHP 6,000.
February 7. Sold merchandise for cash, PHP 250,000.
February 8. Paid the amount due from the February 4 transaction.
February 9. Paid Iloilo freight PHP 4,000 for delivering merchandise last February 4.
February 10. Received returns from the Gonzales, Inc., PHP 70,000.
February 12. Received payment from the Gonzales, Inc. less returns and discounts.
February 14. Paid PHP 26,000 interest on the mortgage payable.
February 15. Paid salaries, PHP 51,000.
February 16. Sold merchandise on account to Ronzales Corp., PHP392,000. Terms: FOB destination; 2/10, n/30
February 18. Paid PHP 4,000 freight charges on the sale of February 16.
February 19. Acquired supplies for cash, PHP 21,000.
February 20. Purchased PHP 125,000 of merchandise from Lozada Imports on account. Terms: FOB destination; 3/10,
n/30.
February 22. Paid PHP 7,000 miscellaneous expenses.
February 23. Received payment from Ronzales Corp. less discounts.
February 24. Purchased PHP 373,000 of merchandise on account from Agustin Enterprises. Terms: FOB shipping
point; 3/10, n/30.
February 24. Paid La Paz Express PHP 9,000 freight for delivering merchandise acquired from Agustin.
February 25. Sold merchandise to Ronzales Corp. on account, PHP 420,000. Terms: FOB shipping point; 2/10, n/30.
February 26. Received returns from Ronzales Corp., PHP71,000.
February 28. Buenaflor withdrew PHP 400,000 from the business.
February 28. Returned merchandise purchased from Agustin on June 24, PHP 25,000.
Required:
1. Post the February 1, 2021 account balances to the ledger accounts.
2. Record the transactions for the month of February in a journal and post the transactions to the ledger.
3. Prepare the worksheet using the following information:
a) Salaries in the amount of PHP 51,000 have accrued on February 28.
b) Insurance coverage with premiums of PHP 2,000 has expired at month-end.
c) Depreciation on the building and on the equipment for the month amounted to PHP 9,000 and PHP 12,000,
respectively.
d) Supplies on hand at month-end amounted to PHP 14,000.
e) A count of the merchandise inventory on February 28, 2021 amounted to PHP 397,000.

4. Prepare the adjusting and closing entries for the month.

5. Prepare and income statement for the month ended February 28, 2021 and a balance sheet as at February 28,
2021.