Sample problem for Merchandising Business

The accounts of Entity A on December 31, 20x1 show the following balances:

Gross sales 5,800,000

Sales returns 116,000
Sales discounts 1,160,000
Gross purchases 2,200,000
110,000
Freight-in
Purchase discounts 66,000
Purchase returns 22,000
Inventory, beg. 460,000
Inventory, end. 320,000

Requirement: Prepare a statement of cost of goods sold and gross profit.

Some review questions:
Provide the journal entries for some of the transactions:
1. The owner Mr. Sicat Invested P5M into his business:
Debit Credit

2. The business paid P50,000 of its Accounts Payable

Debit Credit

3. The business acquired the land title of the owner to be used for the business
Debit Credit

4. The company collected P50k from his previously billed clients

Debit Credit

5. Andrada Co. had total assets, liabilities, and equity of ₱15M, ₱9M and ₱6M, respectively, at the
beginning of the period. During the period, the company’s total liabilities decreased to ₱4M, while
its profit was ₱2.5M. There were no other transactions or events that affected equity during the
period. How much is the company’s ending total assets?

6. Barbosa Co. had total assets and total liabilities of ₱15M and ₱8M, respectively, at the beginning
of the period. During the period, the company earned total income of ₱6 and incurred total
expenses of ₱4. The company’s total assets decreased to ₱13M by year-end. There were no
additional contributions by, or distributions to, the owner during the period. How much is the
company’s ending total liabilities?

7. Charlie Co. has a beginning inventory of ₱14,000. During the period Charlie Co. purchased
inventories costing ₱79,000. Freight paid on the purchase totaled ₱1,000. The ending inventory
was ₱6,000. Gross sales were ₱180,000 while sales returns and discounts totaled ₱22,000. How
much is the gross profit?

8. Go through all the multiple-choice problems from chapters 1 to 10.