LA VERDAD CHRISTIAN COLLEGE

LECTURE FOR FUNDAMENTALS OF

FINANCIAL ACCOUNTING
JANUARY 11, 2023
LA VERDAD CHRISTIAN COLLEGE
ABC CO.
TRIAL BALANCE
AS OF DECEMBER 31, 2021
DEBIT CREDIT
CASH 31,000.00
ACCOUNTS RECEIVABLE 83,000.00
MERCHANDISE INVENTORY 627,000.00
PREPAID INSURANCE 54,000.00
OFFICE SUPPLIES 68,000.00
OFFICE EQUIPMENT 370,000.00
ACCUMULATED DEPRECIATION 50,000.00
ACCOUNTS PAYABLE 58,000.00
CAPITAL 517,000.00
WITHDRAWALS 87,000.00
SALES 2,675,000.00
SALES RETURNS AND ALLOWANCES 26,000.00
SALES DISCOUNT 23,000.00
PURCHASES 1,512,000.00
PURCHASES RETURNS AND ALLOWANCES 14,000.00
PURCHASES DISCOUNT 19,000.00
TRANSPORTATION IN 38,000.00
SALARIES EXPENSE 327,000.00
ADVERTISING EXPENSE 61,000.00
RENT EXPENSE 26,000.00
TOTALS 3,333,000.00 3,333,000.00

Additional information:
a. Merchandise inventory as of Dec. 31. 2018 was P532,000
b. Insurance coverage with premiums of P18,000 has expired /incurred durng the year
c. Depreciation for the year amonted to P25,000
d. Office supplies remaining at year end amounted to P15,000
e. Salaries of P9,000 have accrued as of Dec. 31, 2021

Required:
1. Prepare the worksheet
2. Prepare the income statement & balance sheet
3. Prepare the closing entries and post closing trial balance.
 LA VERDAD CHRISTIAN COLLEGE
ABC CO.
WORKSHEET
FOR THE YEAR ENDED DECEMBER 31, 021

TRIAL BALANCE ADJUSTMENTS INCOME STATEMENT BALANCE SHEET

ACCOUNT TITLE DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT
CASH 31,000.00 31,000.00
ACCOUNTS RECEIVABLE 83,000.00 83,000.00

MERCHANDISE INVENTORY 627,000.00 627,000.00 532,000.00 532,000.00

OFFICE SUPPLIES 68,000.00 d. 53.000 15,000.00
PREPAID INSURANCE 54,000.00 b. 18,000 36,000.00
OFFICE EQUIPMENT 370,000.00 370,000.00
ACCU. DEP. - OFF. EQPT 50,000.00 c. 25,000 75,000.00
ACCOUNTS PAYABLE 58,000.00 58,000.00
SALARIES PAYABLE e. 9,000 9,000.00
CAPITAL 517,000.00 517,000.00
WITHDRAWALS 87,000.00 87,000.00
SALES 2,675,000.00 2,675,000.00
SALES RET. & ALLOW. 26,000.00 26,000.00
SALES DISCOUNT 23,000.00 23,000.00
PURCHASES 1,512,000.00 1,512,000.00

PURCHASES RET. & ALLOW. 14,000.00 14,000.00

PURCHASES DISCOUNT 19,000.00 19,000.00
TRANSPORTATION IN 38,000.00 38,000.00
SALARIES EXPENSE 327,000.00 e. 9,000 336,000.00
ADVERTISING EXPENSE 61,000.00 61,000.00
RENT EXPENSE 26,000.00 26,000.00
OFFICE SUPPLIES EXPENSE d. 53,000 53,000.00
INSURANCE EXPENSE b.18.000 18,000.00
DEP. EXPENSE - OFF. EQPT. c. 25,000 25,000.00
TOTALS 3,333,000.00 3,333,000.00 105,000 105,000 2,745,000.00 3,240,000.00 1,154,000.00 659,000.00
PROFIT 495,000.00 495,000.00
3,240,000.00 3,240,000.00 1,154,000.00 1,154,000.00
LA VERDAD CHRISTIAN COLLEGE

ABC COMPANY
INCOME STATEMENT
AS OF DECEMBER 31, 2021
NET SALES
Gross Sales 2,675,000.00
Less : Sales returns & allowances 26,000.00
Sales Discount 23,000.00 49,000.00
Net Sales 2,626,000.00

COST OF
SALES
Merchandise Inventory, 01/01.2021 627,000.00
Purchases 1,512,000.00
Less: Purchases returns and allowances 14,000.00
Purchases discounts 19,000.00 33,000.00
Net purchases 1,479,000.00
Transportation In 38,000.00
Net Cost of Purchases 1,517,000.00
Goods Available for sale 2,144,000.00
Less : Merchandise Inventory 12/31/2021 532,000.00
Cost of Sales 1,612,000.00

GROSS PROFIT 1,014,000.00

OPERATING EXPENSES
ADVERTISING EXPENSE 61,000.00
RENT EXPENSE 26,000.00
SALARIES EXPENSE 336,000.00
SUPPLIES EXPENSE 53,000.00
INSURANCE
EXPENSE 18,000.00
DEP. EXPENSE - OFF. EQPT. 25,000.00
Total Operating Expenses 519,000.00
Net Profit 495,000.00
LA VERDAD CHRISTIAN COLLEGE

ABC COMPANY

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2021

CAPITAL, 1/1/2021 517,000.00

ADD: NET PROFIT 495,000.00

TOTAL 1,012,000.00

Less: WITHDRAWALS 87,000.00

CAPITAL, 12/31/2021 925,000.00

 LA VERDAD CHRISTIAN COLLEGE
ABC COMPANY
BALANCE SHEET
AS OF DECEMBER 31, 2021

ASSETS
CURRENT ASSETS
CASH 31,000.00
ACCOUNTS
RECEIVABLE 83,000.00
MERCHANDISE INVENTORY 532,000.00
OFFICE SUPPLIES 15,000.00
PREPAID INSURANCE 36,000.00
Total Current assets 697,000.00
PROPERTY, PLANT & EQUIPMENT (NET)
OFFICE EQUIPMENT 370,000.00
LESS: ACCU. DEP. - OFF. EQPT 75,000.00 295,000.00

TOTAL ASSETS 992,000.00

LIABILITIES

CURRENT LIABILITIES
ACCOUNTS PAYABLE 58,000.00

SALARIES PAYABLE 9,000.00

TOTAL CURRENT LIABILITIES 67,000.00

TOTAL LIABILITIES 67,000.00

OWNER'S EQUITY

CAPITAL, DEC. 31 925,000.00

TOTAL LIABILITIES AND OWNER'S EQUITY 992,000.00

LA VERDAD CHRISTIAN COLLEGE
AJUSTING ENTRIES FOR ABC COMPANY

AJUSTING ENTRIES ACCOUNT TITLES

FOR ABC AND
COMPANY
DATE EXPLANATION DEBIT CREDIT
2021
ACCOUNT TITLES AND
Dec.
DATE31 insurance Expense
EXPLANATION 18,000.00
DEBIT CREDIT
2021
Prepaid Insurance 18,000.00
Dec. 31 insurance Expense 18,000.00
To correct the balance of prepaid insurance
Prepaid Insurance 18,000.00
31 Office supplies
To correct expenseof prepaid insurance
the balance 53,000.00

Office supplies 53,000.00

31 Office supplies expense 53,000.00
To correct balance of office supplies
based
Officeon the result of count on hand
supplies 53,000.00
To correct balance of office supplies
based on the result of count on hand
31 Depreciation expense - office equipment 25,000.00

Accumulated depreciation- office eqpt. 25,000.00

31 Depreciation expense - office equipment 25,000.00
To take up annual depreciation expense
Accumulated depreciation- office eqpt. 25,000.00
To take up annual depreciation expense
31 Salaries expense 9,000.00

Salaries payable 9,000.00

31 Salaries expense 9,000.00
To take up accrued salaries
Salaries payable 9,000.00
To take up accrued salaries
LA VERDAD CHRISTIAN COLLEGE
CLOSING ENTRIES FOR ABC COMPANY : CLOSING ENTRY METHOD

DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT

2021
Dec. 31 MERCHANDISE INVENTORY , END 532,000.00
SALES 2,675,000.00

PURCHASES RETURNS AND ALLOWANCES 14,000.00

PURCHASES DISCOUNTS 19,000.00

INCOME SUMMARY 3,240,000.00
To close temporary accounts with credit
balances and to establish the ending
merchandise inventory

31 INCOME SUMMARY 2,745,000.00

MERCHANDISE INVENTORY, BEGINNING 627,000.00
SALES RETURNS AND ALLOWANCES 26,000.00
SALES DISCOUNTS 23,000.00
PURCHASES 1,512,000.00
TRANSPORTATION IN 38,000.00
ADVERTISING EXPENSE 61,000.00
RENT EXPENSE 26,000.00
SALARIES EXPENSE 336,000.00
SUPPLIES EXPENSE 53,000.00
INSURANCE EXPENSE 18,000.00
DEP. EXPENSE - OFF. EQPT. 25,000.00
To close temporary accounts with debit
balances and to remove beginning
inventory

31 INCOME SUMMARY 495,000.00

CAPITAL, end 495,000.00
To close the Income Summary account

31 CAPITAL, end 87,000.00

WITHDRAWALS 87,000.00
To close the withdrawal account
LA VERDAD CHRISTIAN COLLEGE

ABC COMPANY
POST-CLOSING TRIAL BALANCE
AS OF DECEMBER 31, 2021

DEBIT CREDIT
CASH 31,000.00
ACCOUNTS RECEIVABLE 83,000.00
MERCHANDISE INVENTORY 532,000.00
OFFICE SUPPLIES 15,000.00
PREPAID INSURANCE 36,000.00
OFFICE EQUIPMENT 370,000.00
ACCU. DEP. - OFF. EQPT 75,000.00
ACCOUNTS PAYABLE 58,000.00
SALARIES PAYABLE 9,000.00
CAPITAL, END 925,000.00
1,067,000.00 1,067,000.00
LA VERDAD CHRISTIAN COLLEGE
Assignment - December 12, 2022

1. ABC Co. Engaged in the following purchase transactions during the month. The company
follows the policy that all returns are made one day after the goods are received and that
all purchases are paid within the discount period .

TRANSPORTATI
ON PURCHASES RETURNS
AND CREDIT TRADE
LIST PRICE FOB TERMS COST ALLOWANCES TERMS DISCOUNT

224,000.00 Shipping point- freight collect 4,000.00 21,000.00 2/10, n/30 30%

126,000.00 Destination- freight prepaid 9,000.00 - 1/10, n/30 20%

90,000.00 Shipping point- freight prepaid 2,000.00 7,000.00 2/10. n/30 -

41,000.00 Destination- freight collect 1,000.00 9,000.00 n/30 25%

357,000.00 Destination- freight prepaid 14,000.00 24,000.00 3/10, n/30 20%

a.Using the table above, compute the net purchases and accounts payable to be settled for each cases.
b. Prepare the accounting entries for each cases
 LA VERDAD CHRISTIAN COLLEGE
ANSWERS ON EXERCISES FOR TRANSPORTATION COST &
DEFERRALS/ACCRUALS

TRANSP. PUR. RET. TRADE PUR. RET. NET TRANS. TOTAL ACCOUNTS TRANSP. CASH

NET DISCOUN
LIST PRICE FOB TERMS COST & ALLOW. CREDIT TERMS DISCOUNT INVOICE & ALLOW. PURCHASES IN PURCHASES PAYABLE PAID T TO BE PAID

224,000.00 Shipping point- freight collect 4,000.00 21,000.00 2/10, n/30 30% 156,800.00 21,000.00 135,800.00 4,000.00 139,800.00 135,800.00 2,716.00 133,084.00

126,000.00 Destination- freight prepaid 9,000.00 - 1/10, n/30 20% 100,800.00 - 100,800.00 - 100,800.00 100,800.00 1,008.00 99,792.00

90,000.00 Shipping point- freight prepaid 2,000.00 7,000.00 2/10. n/30 - 90,000.00 7,000.00 83,000.00 2,000.00 85,000.00 85,000.00 1,660.00 83,340.00

-
41,000.00 Destination- freight collect 1,000.00 9,000.00 n/30 25% 30,750.00 9,000.00 21,750.00 - 21,750.00 20,750.00 1,000.00 20,750.00

357,000.00 Destination- freight prepaid 14,000.00 24,000.00 3/10, n/30 20% 285,600.00 24,000.00 261,600.00 - 261,600.00 261,600.00 7,848.00 253,752.00
LA VERDAD CHRISTIAN COLLEGE
1 2 3 4 5

INVOICE 156,800.00 100,800.00 90,000.00 30,750.00 285,600.00

LESS: Purchases ret . & allow. - 21,000.00 - - 7,000.00 - 9,000.00 - 24,000.00
Purchases disct. - 2,716.00 - 1,008.00 - 1,660.00 - - 7,848.00

Net Purchases 133,084.00 99,792.00 81,340.00 21,750.00 253,752.00

transp. In 4,000.00 - 2,000.00 - -

Net cost of purchases 137,084.00 99,792.00 83,340.00 21,750.00 253,752.00

INVOICE 156,800.00 100,800.00 90,000.00 30,750.00 285,600.00

LESS: Purchases ret . & allow. - 21,000.00 - - 7,000.00 - 9,000.00 - 24,000.00

NET PURCHASES 135,800.00 100,800.00 83,000.00 21,750.00 261,600.00

ADD: TRANSP. FREIGHT PREPAID 2,000.00

ACCOUNTS PAYABLE 135,800.00 100,800.00 85,000.00 21,750.00 261,600.00

LA VERDAD CHRISTIAN COLLEGE
1 PURCHASES 156,800.00
TRANSPORTATION IN' 4,000.00

PURCHASES RETURNS & ALLOWANCES 21,000.00

ACCOUNTS PAYABLE 135,800.00
CASH 4,000.00

ACCOUNTS PAYABLE 139,800.00

PURCHASES DISCOUNT 2,716.00
CASH 133,084.00

2 PURCHASES 100,800.00
ACCOUNTS PAYABLE 100,800.00

ACCOUNTS PAYABLE 100,800.00

PURCHASES DISCOUNT 1,008.00
CASH 99,792.00

3 PURCHASES 90,000.00
TRANSPORTATION IN' 2,000.00
PURCHASES RETURNS & ALLOWANCES 7,000.00
ACCOUNTS PAYABLE 85,000.00

4 PURCHASES 30,750.00
PURCHASES RETURNS & ALLOWANCES 9,000.00
ACCOUNTS PAYABLE 20,750.00
CASH 1,000.00

ACCOUNTS PAYABLE 20,750.00

CASH 20,750.00

5 PURCHASES 285,600.00
PURCHASES RETURNS & ALLOWANCES 24,000.00
ACCOUNTS PAYABLE 261,600.00

ACCOUNTS PAYABLE 261,600.00

PURCHASES DISCOUNT 7,848.00
CASH 253,752.00