PERIODIC INVENTORY METHOD Problem 1: Paul Dee registered his business PD Merchandising with DTI and started operation on May of the current year. Below are the transactions of his business during the month of May. Note: Amounts in Philippines Peso (P) May 3 Paul Dee invested 50,000 to start his merchanclsing business. 4 Purchased goods from ABC Marketing, list price 30,000, trade discount 20%, terms 2/10, n/20, FOB Shipping Point, Freight Collect 1,200. 5 Purchased store equipment worth 45,000. 6 Sold merchandise for cash, 15,000. 8 Invested additional cash of 50,000 and delivery equipment worth 80,000. 9 Purchased merchandise for cash, 20,000. 12 Returned to ABC Marketing defective merchandise worth 500. 14 Pald ABC Marketing. 15. Pald salary, 1,500. 16 _ Issued a promissory note to LandBank for loan taken, 100,000, 16 Purchased supplies worth 900 on credit. (Use asset method) 17 Purchased goods for cash, 40,000. 18 Sold merchandise, 28,000, FOB Destination, term 2/10, n/eom. 20 Paid for freight for May 18 sales, 700. 22 Received cash 850 for defective merchandise purchased on May 9. 23, Sold merchandise, 12,000, FOB Shipping Point, terms 2/10, n/30. Freight of 200 was paid by Paul Dee. 25 Paul Dee withdrew 2,000 for personal use. 28 Received partial payment for May 18 sales, 5,000. 30 Paid salary, 1,500. 31 Pald various expenses: Utilities 400 Fuel Expense 800 Rent 2,500 31 _ Recelved defective merchandise on May 18 sales, 350. 31 Recelved full payment for May 23 sales. 31 _ Refunded the customer 650 for defective merchandise sold on May 6. Ending inventory is 38,000. Required: 1 Prepare Journal Entries Post the Journal Entries to the Ledger Prepare Trial Balance Prepare Statement of Cost of Goods Sold Prepare Income Statement Prepare Statement of Changes in Owner's Equity Prepare Balance Sheet Prepare Statement of Cash Flow Prepare adjusting entry to set up ending inventory and closing entries. 10. Prepare Post-Closing Trial BalanceCHART OF ACCOUNTS FOR JOURNALIZING TRANSACTION 100 ASSETS 400 REVENUE 101 _| Cash 401 | Sales 103 _| Accounts Receivable 402 | Sales Returns and Allowances 104 | Supplies 403 | sales Discounts 115 __| Merchandise inventory 121 _| store Equipment 500 COST OF GOODS SOLD 123 _ | Delivery Equipment 502 | Purchases 503 | Freight in 200 LIABILITIES. 504 | Purchase Returns and Allowances 211 | Accounts Payable '505_| Purchase Discounts 221 _| Notes Payable 600 OPERATING EXPENSES 300 EQuiTy 604 | Freight Out 301 _| P. Dee, Capital 607 | Fuel Expense 302__| P. Dee, Drawing 610 | Salary Expense 303 | income Summary 612 | Rent Expense 616 | Utilities CHART OF ACCOUNTS FOR PREPARATION OF FINANCIAL STATEMENTS 100) ASSETS 400 REVENUE 101 _| Cash and Cash Equivalents 401 | Sales 103 _| Accounts Receivable 402 | sales Returns and Allowances 104 | Supplies 403 | Sales Discounts 115 | Merchandise Inventory 121 _| Store Equipment 500 ‘COST OF GOODS SOLD 123 _| Delivery Equipment 502 | Purchases '503_| Freight in 200 LIABILITIES. 504 | Purchase Returns and Allowances 211 | Accounts Payable 505 | Purchase Discounts 221 | Notes Payable 600 OPERATING EXPENSES 300 EQUITY 604 | Freight Out 301 _| P. Dee, Capital 607 | Fuel Expense 302__| P. Dee, Drawing 610 | Salary Expense 303 _| income summary 612 | Rent Expense 616 UtilitiesGeneral Journal Page 1 (Gl-1) 20xx | ACCOUNT TITLES & EXPLANATION Sa Desir CREDIT May | 03 | Cash 101 50,000 P. Dee, Capital 301 50,000 “To record investment of owner. # 04 | Purchases 502, 24,000 Freight In 503, 41,200 ‘Accounts Payable 211 24,000 Cash 101 1,200, To record purchases from ABC Mktg, 2/10, n/20. # 05 | store Equipment 121 45,000 Cash 101 45,000 Torecord purchase of store equipment. # 06 | cash 101 15,000 Sales 401 15,000 “To record cash sales # 08 | Cash 101 50,000 Delivery Equipment 123 80,000 P. Dee, Capital 301 130,000 ‘To record addition investment af owner # 09 | Purchases 502, 20,000 Cash 101 20,000 To record cash purchases. # 12 | Accounts Payable 21, 500 Purchase Returns and Allowances 504 500, To record purchase returns to ABC Mktg. # 14 | Accounts Payable 211, 23,500 Purchase Discount 505, 470 Cash 203 23,030 To record full settlement of pay. to ABC Mktg. less discount # 15 | Salary Expense 610 1,500 Cash 101 1,500, To record payment of salary. # 16 | Cash 101 100,000, Notes Payable 221, 100,000 To record cash loan from Land Bank, ssued promissory note. # 16 | Supplies 04 900 ‘Accounts Payable 211 300) “To record purchase of supplies on credit # 17 | Purchases 502 40,000 Cash 102 40,000 To record cash purchases.General Journal Page 2 (GI-2) 20xx__ | ACCOUNT TITLES & EXPLANATION. Sex| DEBIT CREDIT May | 18 | Accounts Receivable 103 28,000 sales 401 28,000 To,record sales to customer, 2/10, n/eom. i 20 | Freight Out 604 700 Cash. 101 700 Torecord payment of friendon May 18 sales. i 22 | Cash 101 850 Purchase Returns and Allowances 504 850 To record cash refund from supplier on May 9 purchases. # 23 | Accounts Receivable 103 12,200 Sales 401 12,000 Cash 101 200 Torrecord sales, 2/10, n/30, freight prepaid 200. i 25 | P. Dee, Drawing 302 2,000 Cash. 101 2,000 To record withdrawal of cash by the owner. # 28 { Cash 101 5,000 Accounts Receivable 103, 5,000 Torrecord partial collection of rec. from May 18 sales. # 30 | Salary Expense 610 1,500 Cash. 101 1,500 Torecord payment of salary. i 31 | Fuel Expense 607 800 Rent Expense 612 2,500 Utilities 616 400 Cash 101 3,700 Torecord payment of fue, rent, and utilities. # 31 | Sales Returns and Allowances 402 350 Accounts Receivable 103 350 To record sales returns on May 18 sales. # 31 Cash 101 11,960 Sales Discounts 403 240 Accounts Receivable 103 12,200 Torrecord collection of rec. from May 23 sales ess discount. i 31 Sales Returns and Allowances 402 650 Cash 101 650 To record cash refund to customer on May 6 sales.GENERAL LEDGER ‘Account Number: 102, ‘Account Name: CASH BALANCE 20Xx PARTICULARS, pk. | DEBIT | CREDIT ST Ceear May | 03 | investment Gia | 50,000 50,000 04 | Freight In Gr 1,200 [48,800 05 | Store Equipment GH 45,000 | 3,800 06 | sales Gi | 15,000 18,800 08 | Additional investment Gri | 50,000 (68,800 (09 | Purchases Gi 20,000 | 48,800 14 | Payment — ABC Gr 23,030 | 25,770 415 | Salary Gil 1,500 | 24,270 16 | Loan ~ Land Bank Ga | 100,000 124,270 17 | Purchases Gi ‘40,000 | 84,270 20 | Freight Out Gh2 700| 83,570 22 | Refund from supplier G2 850) 84,420 23 | Freight prepaid GI2 200 | 84,220 25 | withdrawal G2 2,000 | 82,220 28 | Collection ~ May 18 sales G2 [5,000 87,220 30 | Salary Gi2 1,500 _ 85,720 31 | Fuel, Rent, and Utilities G2 3,700 82,020 31 | Collection ~ May 23 sales G2 | 11,960 93,980 31| Refund to customer Gh? 650 | 93,330 GENERAL LEDGER ‘Account Number: 103 ‘Account Name: ACCOUNTS RECEIVABLE BALANCE 20XX PARTICULARS. pr] DEBIT | CREDIT} Coe May | 18 | Sales - 2/10, n/eom 2 | 28,000 28,000 23 | Sales ~ 2/10, n/30, and Freight prepaid, 200 | Gi-2 | _ 12,200 40,200, 28 | Collection = May 18 sales G2 5,000 | 35,200 31 | Sales returns ~ May 18 sales G2 350[ 34,850 31 | Collection - May 23 sales Gi? 12,200 | 22,650 GENERAL LEDGER ‘Account Number: 104 ‘Account Name: SUPPLIES BALANCE 20Xx PARTICULARS. PR] DEBIT | CREDIT |e ceeor May | 16 | Credit GH 900) 200 GENERAL LEDGER ‘Account Number: 115 Account Name: MERCHANDISE INVENTORY BALANCE 20XXx PARTICULARS. pr. | oepiT | CREDIT |e] caer May | 31 | Establishment G3 | 38,000 38,000 GENERAL LEDGER ‘Account Number: 121 ‘Account Name: STORE EQUIPMENT BALANCE 20Xx PARTICULARS. PR | DEBIT | CREDIT |} ty creo May | 05 | Cash Gi | 45,000 45,000GENERAL LEDGER ‘Account Number: 123 ‘Account Name: DELIVERY EQUIPMENT BALANCE 20XXx PARTICULARS PR, | DEBIT | CREDIT |e Cpe May | 08 | Additional investment Gi-1 | 80,000 ‘80,000 GENERAL LEDGER ‘Account Number: 212 ‘Account Name: ACCOUNTS PAYABLE BALANCE 20Xx PARTICULARS PR | dept | CREDIT SS eae May | 04 | ABC Mktg. - 2/10, n/20 Gh 24,000 24,000 12 | Purchase returns - ABC Gh 500 23,500 14 | Payment — ABC Gi | 23,500 0 16 | Supplies Gh 900 ‘900 | GENERAL LEDGER ‘Account Number: 221 Account Name: NOTES PAYABLE BALANCE 20XX PARTICULARS p.R, | DEBIT | CREDIT} a May | 16 | Cash Loan — Land Bank Gia 100,000 200,000 | GENERAL LEDGER ‘Account Number: 302 ‘Account Name: P. DEE, CAPITAL BALANCE 20Xx PARTICULARS PR. | DEBIT | CREDIT SS cRepir May | 03 | cash Gia 50,000. 50,000 08 | Cash and Delivery equipment Gh 130,000 180,000 31| Income summary G3 980 180,980 31| Drawing Gi-3 | 2,000 178,980 | GENERAL LEDGER ‘Account Number: 302 ‘Account Name: P. DEE, DRAWING BALANCE 20XXx PARTICULARS PR. | DEBIT | CREDIT |) crepir May | 25 | Cash Gi-2 | 2,000 2,000 31 | Closing G3 2,000 Q GENERAL LEDGER ‘Account Number: 303 ‘Account Name: INCOME SUMMARY BALANCE 20Xx PARTICULARS PR. | DEBIT | CREDIT a) crepir May | 31 | Sales G3 53,760 53,760 31 | Merchandise inventory and Purchases Gi3 | 45,380 8,380 31| Expense G3 | 7,900 980 31 | Closing GI3 980 g|GENERAL LE! DGER ‘Account Number: 401, ‘Account Name: SALES 20XX PARTICULARS pr. | DEBIT | CREDIT BALANCE beet | CREDIT May | 06 | Cash Ga 15,000 15,000 18 | Credit Gh2 28,000 43,000 23 | Credit Gh2 12,000 55,000 31 | Closing Gs-3 | 55,000 ry GENERAL LEDGER ‘Account Number: 402 ‘Account Name: SALES RETURNS AND ALLOWANCES 20XX PARTICULARS pr. | Desir | CREDIT Salenet besit | CREDIT May | 31 | May 18 sales GI2 350) 350) 31 | May 6 sales G2 650) 1,000 31 | Closing G3 1,000) GENERAL LEDGER ‘Account Number: 403 ‘Account Name: SALES DISCOUNTS BALANCE 20XX PARTICULARS pr. | peer | CREDIT May | 31 | May 23 sales G2 240) 240 31 | Closing. Gh3 240 2 GENERAL LEDGER ‘Account Number: ‘Account Name: PURCHASES BALANCE 20XX PARTICULARS PR | DEBIT | CREDIT Sor) caso May | 04 | Credit Gri | 24,000 24,000 09 | Cash Gi-1 | 20,000 44,000 17 | Cash Gi-1 | 40,000 84,000 31| Closing G3 84,000 2 GENERAL LEDGER ‘Account Number: 503 ‘Account Name: FREIGHT IN BALANCE 20XX PARTICULARS PR. | DEBIT | CREDIT oT caso May | 04 | Cash Git | 1,200 1,200 31 | Closing G3 1,200 2 GENERAL LEDGER ‘Account Number: 504 Account Name: PURCHASE RETURNS AND ALLOWANCES: 20XX PARTICULARS pr. | DEBIT | CREDIT Jauch beet | CREDIT May | 12 | Credit = ABC Mktg. Gh 500) 500, 22 | Cash- May 9 purchases, Gh2 850) 1,350 31 | Closing G3 | 1,350 QoGENERAL LEDGER ‘Account Number: 505 ‘Account Name: PURCHASE DISCOUNTS: BALANCE 20XXx PARTICULARS PR. | DEBIT | CREDIT Oa) crepir May | 14 | ABC Mktg. ont 470 470 31 | Closing G3 470 o| GENERAL LEDGER ‘Account Number: 604 Account Name: FREIGHT OUT BALANCE 20XXx PARTICULARS PR. | DEBIT | CREDIT |e Crepe May | 20 | Cash Gi-2 700 700 31 | Closing G3 700 GENERAL LEDGER ‘Account Number: 607 ‘Account Name: FUEL EXPENSE BALANCE 20XXx PARTICULARS PR | DEBIT | CREDIT oa Caer May | 31 | Cash GI-2 800 800 31 | Closing G3 800 2 GENERAL LEDGER ‘Account Number: 610 ‘Account Name: SALARY EXPENSE BALANCE 20XXx PARTICULARS PR | DEBIT | CREDIT |r crepe May | 15 | cash Gi-1| 1,500 1,500 30 | Cash G2 | 1,500 3,000 31 | Closing G3 3,000 2 GENERAL LEDGER ‘Account Number: 612 ‘Account Name: RENT EXPENSE BALANCE 20Xx PARTICULARS PR | DEBIT | CREDIT [ST crepe May | 31 | Cash. Gi-2 | 2,500 2,500 31| Closing G3 2,500 2 GENERAL LEDGER ‘Account Number: 615 Account Name: UTILITIES BALANCE 20XXx PARTICULARS PR. | DEBIT | CREDIT | pear May | 31 | Cash. Gi-2 400 400 31 | Closing G3 400 QPD MERCHANDISING ‘TRIAL BALANCE (UNADJUSTED) MAY 31, 20xx Se ACCOUNT NAME besiT cREDIT 101 Cash 93,330 103 Accounts Receivable 22,650 104 Supplies 900 121 Store Equipment 45,000 123 Delivery Equipment 80,000 211 Accounts Payable 300 221 Notes Payable 100,000 301 P, Dee, Capital 180,000 302 P. Dee, Drawing 2,000 401 Sales 55,000 402 Sales Returns and Allowances 1,000 403 Sales Discounts 240 502 Purchases 84,000 503. Freight In 1,200 504 Purchase Returns and Allowances 1,350 505 Purchase Discounts 470 604 Freight Out 700 607 Fuel Expense 800 610 Salary Expense 3,000 612 _ Rent Expense 2,500 615 Utilities 400 TOTALS 332.220 332,220 NOTE: Amounts are based on ledger balances before closing the accounts PD MERCHANDISING STATEMENT OF COST OF GOODS SOLD MAY 31, 20XX Merchandise Inventory, Beg. 0 Add: Purchases 84,000 Less: Purchase Returns and Allowances 1,350 Purchase Discounts 470 Total 82,180 Add: Freight In 1,200 Net Cost of Purchases 83,380 Goods Available for Sale 83,380 Less: Merchandise Inventory, End. 38,000 Cost of Goods Sold 45,380PD MERCHANDISING INCOME STATEMENT MAY 31, 20Xx sales Less: Sales Returns and Allowances 1,000 Sales Discounts 240 Net Sales Less: Cost of Goods Sold Gross Profit Less: Operating Expenses: Freight Out 700 Fuel Expense 800 Salary Expense 3,000 Rent Expense 2,500 Utilities 400 Total Operating Expenses Net Profit PD MERCHANDISING STATEMENT OF CHANGES IN OWNER’S EQUITY MAY 31, 20xx P. Dee, Capital, Beg. ° Add: Investment 180,000 Less: Withdrawal 2,000 Net Capital 178,000 Add: Net Profit 980 P. Dee, Capital, End. 178,980 or P. Dee, Capital, Beg, ° ‘Add: Investment 180,000 Less: Withdrawal 2,000 Add: Net Profit 980 P. Dee, Capital, End. 278,980 55,000 1,240 53,760 45,380 8,380 7,400PD MERCHANDISING BALANCE SHEET MAY 31, 20XX ASSETS, Current Assets: Cash and Cash Equivalents ‘Accounts Receivable Supplies Merchandise inventory Total Current Assets Non-Current Assets: Store Equipment Delivery Equipment Total Non-Current Assets Total Assets UABILITIES AND OWNER’S EQUITY Current Liabilities: ‘Accounts Payable 900 Total Current Liabilities 900 Non-Current Liabilities: Notes Payable Total Non-Current Liabilities Total Liabilities Owner's Equity P. Dee, Capital 178,980 Total Owner's Equity 178.980 Total Liabilities and Owner's Equity 272,880 NOTE: Amounts are based on Ledger balances after closing the accounts.PD MERCHANDISING STATEMENT OF CASH FLOW MAY 31, 20XX Cash Flow from Operating Activities: Cash Received from Cash Sales 15,000 Receivables (Collected) 16,960 Refund from Supplier (Purchase Returns and Allowances - Cash) 850 Cash Payment to: Goods bought (Paid purchases) (83,303) Freight on Purchases (Freight In) (1,200) Freight on Sales (Freight Out) (700) Freight Payment (Freight Prepaid) (200) Refund to Customers (Sales Returns and Allowances - Cash) (650) Operating Expenses (Excluding Freight Out) 6,700) Net Cash Flow from Operating Activities: (32.670) Cash Flow from Investing Activities: Purchase of Store Equipment (45,000) Net Cash Flow from Investing Activities (45,000) Cash Flow from Financing Activities: Investment (Cash only) 100,000 Borrowing (Bank loans) 100,000 Drawing (Cash only) 2,000} Net Cash Flow from Financing Activities “128.000 Net Increase/Decrease In Cash for the Period 93,330 ‘Add: Cash Balance, Beg, o Cash Balance, End. 93,330 NOTE: Refer to CASH ledger.General Journal Page 3 (GJ-3) Closing Entries 20xx ACCOUNT TITLES & EXPLANATION oa DEBIT CREDIT May | 31| Sales 401 55,000 Sales Returns and Allowances 402 1,000 Sales Discounts 403 240 Income Summary 303 53,760 Toclose sales account to Income Summary. # 31 Merchandise Inventory 1s 38,000 Income Summary 303 45,380. Purchase Returns and Allowances 504 1,350, Purchase Discounts 505 470 Purchases 502 84,000 Freight in 503 1,200 Toestablish merch nv. & to close purchases account to Income Summary. ft 31] Income Summary 303 7,400. Freight Out 604 700 Fuel Expense 607 800 Salary Expense 610 3,000 Rent Expense 612 2,500 Utilities 615 400 To close expense account to Income Summary. # 31| Income Summan 303 980 P. Dee, Capital 301 980 Toslose income Summary account to capital account # 31] P. Dee, Capital 301 2,000. P. Dee, Drawing 302 2,000 Toclovecrawing account to capital actount. ft PD MERCHANDISING POST-CLOSING TRIAL BALANCE MAY 31, 20%X eS ACCOUNT NAME Desir revit 101 Cash 93,330 103 Accounts Receivable 22,650 104 Supplies 900 115 Merchandise Inventory 38,000 121 Store Equipment 45,000 123 Delivery Equipment 80,000 211 =~ Accounts Payable 900 221 Notes Payable 100,000 301. Dee, Capital 178,980 ToTats 272,880 272,880 NOTE: Amounts are based on ledger balances after closing the accounts. Problem 2: Adjusting Entries (3 cases, 4 points each case) Study na lang ang mga adjusting entries: a. Accrual of Income: Income Method and Liability Method (Original Entry Assumption: Income Method) b. Accrual of Expense: Expense Method and Asset Method (Original Entry Assumption: Asset Method) GOD BLESS AND GOOD LUCK!