Accounting Essentials (Drill – Chapter 7)

Problem 1: Trade and Cash Discount Calculations

On June 1, 2022, Marites de la Cruz School Supplies sold merchandise with a P120,000 list
price. Trade discount, 30%, credit terms, 2/10, n/30, date paid on June 8. Determine the amount
recorded as a sale and the amount of cash received.

June 01 Accounts Receivable P 120,000

Sales P120,000

June 08 Cash 117,600

Sales Discount 2,400
Accounts Receivable 120,000

Problem 2: On May 15, 2022, the Valencia Book Distributors acquired for resale books on
account with a list price of P108,000. Malaybalay Publishing, the supplier, allowed a 15% trade
discount as well as credit terms of 2/10, n/30. Valencia paid the invoice in full on May 20, 2022.
Required: Prepare the journal entries for Valencia Book Distributors.

May 15 Purchases P 91,800

Accounts Payable P 91,800

May 20 Accounts Payable 91,800

Purchases Discount 1,836
Cash 89,964

Problem 3: Journalizing Merchandising Transactions

MUG Tires entered into the following transactions during the month of June 2022:
June 2 Purchased 1,000 tires at a cost of P600 per tire. Term of payment: 1/10, net 45.
4 Paid trucking firm P8,000 to ship the tires purchased on June 2.
5 Purchased 600 tires at a cost of P600 per tire. Terms of payment:2/10,net 30.
6 Paid trucking firm P5,000 to ship the tires purchased on June 5.
7 Returned 150 of the tires purchased on June 2 because they were defective. Received a
credit on open account from the seller.
11 Paid for tires purchased on June 2.
13 Sold 700 tires from those purchased on June 2. The selling price was P900 per tire.
Terms: 1/10, net 30.
22 Received cash from sale of tires on June 13.
30 Paid for tires purchased on June 5.
Required: Prepare the journal entries under perpetual and periodic inventory systems.

Problem 4: The following information pertains to the Dologon Furniture Shop:

Transportation In P172,000
Merchandise Inventory, 1/1/2021 1,200,000
Merchandise Inventory, 12/31/2021 1,900,000
Purchases 4,300,000
Purchase returns and Allowances 129,000
 Purchase discounts 215,000
Requirement: Prepare the cost of goods sold section of the income statement for the year ended
Dec. 31, 2021.