Accounting for Merchandising Businesses

Sample Problems:

Problem 1: Journalizing Transactions

Pozorubio Tires entered into the following transactions during the month of June 2022, its first month of operations:
 June 1 – invested cash of P500,000 to the business
 June 2 – paid rentals for store and office building, P10,000
 June 4 – purchased 1,000 tires costing P350 each, on account with payment terms of 2/10, n/30.
 June 5 – paid freight costs of P2,000 for June 4 purchase
 June 6 – returned 50 defective tires regarding June 4 purchase and received a credit memo from the supplier
 June 12 – sold 400 tires at a price of P800 per tire, on account with payment terms of 2/10, n/30.
 June 13 – paid freight costs for June 12 sale, P200
 June 14 – paid the supplier regarding June 2 purchase transaction.
 June 18 – sold 100 tires at a price of P780 on cash
 June 19 – purchased additional 200 tires at P350 each on cash.
 June 22 – received cash from customers regarding June 12 sale.
 June 27 – sold another 150 tires to Lingayen Motors at a price of P800 each, terms of 2/10, n/30.
 June 28 – paid salaries, P10,000
 June 29 – paid utilities, P12,000
 June 30 – withdrew cash for personal use, P5,000

Required: Prepare journal entries under:

 Periodic Inventory system
 Perpetual Inventory system (assume First-in-First-out)

Problem 2: Income Statement of Merchandising Businesses

The partial income statements of five different companies are as follows (all amounts are in PHP):
Company A Company B Company C Company D Company E
Net sales ? ? 250,000 290,000 400,000
Beginning ? 50,000 70,000 ? 120,000
inventory
Net cost of 80,000 ? ? 60,000 390,000
purchases
Goods available 110,000 160,000 ? ? ?
for sale
Ending inventory 40,000 ? 30,000 70,000 ?
Cost of goods sold ? 140,000 230,000 ? 380,000
Gross profit 50,000 40,000 ? 160,000 ?

Required: Supply the missing amounts.

Problem 3: Financial Statement of Merchandising Business - Comprehensive

The following information shown below were obtained on Dizon General Merchandise's financial statements for the year 2019:

Gross sales P1,330,000

Sales discounts, returns and allowances 30,000
Cost of sales 60% of net sales
Marketing expenses 120,000
Delivery expenses 10,000
Gross purchases 700,000
Purchase discounts, returns and allowances 10,000
Beginning inventory 200,000
Freight in 2,000
Ending inventory ?
Office and other expenses 100,000

In addition, the following balance sheet accounts were obtained in the company’s books:
Beginning capital P10,000
Drawings 1,000
Total liabilities 100,000
Cash ?
Trade and other receivables 100,000
Property, plant and equipment 150,000

Required: Calculate the following balances:

1. Gross profit
2. Ending inventory
3. Net income
4. Ending capital
5. Total assets
6. Cash