Name

- - - - - ------- - - -- - - - Date - - -- - - -
Professor - - - - - - - - - - -- - - -- - - Score--- - - - - -

EXERCISE I

I.I TRUE or FALSE

1. Accounting is applicable only to a business enterprise.

2. The primary objective of a business is to satisfy the needs of the customers.
3. In a sole proprietorship,. the owner is usually the manager.
4. In a partnership, all the partners are managers.
5. In a corporation, management is vested in the president of the corporation.
6. ln a corporation, the liability ohhe shareholders for the unpaid debts is
limited only to the extent of their capital contribution.
7. In a partnership, the liability of the partners is limited only up to the extent of
their capital contribution.
8. Accounting is an information provider and communicator.
9. The most important function of :accounting is the recording function because
this is the very first function.
10. The least important function of accounting is the interpreting function
because this is the last function.
11 . An income statement shows the financial condition of the business.
__ 12. The balance sheet will show whether the business makes a profit or incurs a
loss.
13. The statement of cash nows sho,ws where the money of the business was
spent or used.
14. The Generally Accepted Accounting Principles arc enacted by law hence are
to be followed.
I 5. Objectivity simply means that the information provided is free from bias and
is verifiable.
16. The recording function is also known as book.keeping.
__ 17. To analyze the financial statements is synonymous to interpreting the
financial statements.
__ 18. The business entity concept means that the objective of a business is to earn
profits.
19. Under the going-concern concept or theory. the life of a business is indefinite.
__20. Under the accrual basis of accounting, income is recorded or recognized only
when collected and expenses are recorded only when paid.

14-A
 1.2 l\tlllTIPLE CHOICES

1. Which ti!' the following arc considered as internal users of accounting infonnation?
a. Owners c. Employees
b. Managers d. Customers

"I Which of the following is not a function of accounting?

a. Bookkeeping c. Budgeting
h. Interpreting d. Summarizing

3. \\'hich of the following is a generally accepted accounting principle?

a. Business entity c. Matching costs against revenue
b. Going-concern d. Accounting period

➔. \\'hich of the following is not a requirement for taking the CPA licensure
examination·.• ·
a. Holda of BSA degree c. 21 years of age or more
h. CiooJ moml character d. Filipino citizen

5. \\'hich (11' th,: following is not within the scope of the CPA licensure examination?
a. Tuxation c. Marketing
h. Manag,:ment Services d. Business law

6. Accounting is useful to which of the following?

a. lndh·iduals c. Non-profit organizations
h. Busin\.'ss Organi1.ations d. All of the given

7. Accounting is consid\.'rcd as
a. a sc1cn..:,: c. both art and science
h. an an d. neither art nor science

8. \\'hich o f the following has the most complex operations?

a. Trading c. Manufacturing
h. Sa,·icing d. Merchandising

9 . .-\rrang'-' the follo,\ing functions of accounting in a sequential manner.

A. Classi fying C. lnterpretil)g
B. Recording D. Summarizing

a. 11. A. D & C' c. A. B. D & C

h. B. A. C & D d. C. D. A & r,

IO. Which nf the follm-.ing has/have unlimited liabi lity for the unpaid debts of the
busim:ss·.>
a. Sok proprii:tor c. Aoth
h. Purtncrs d. Neither

14-8
Name Date - --
------------- - - ----- ----
Profc sso r Score
- ---------- - ------ - - --

1.3 IDENTIFICATION

I. In charge of regulating and licensing of professionals

2. In charge of administering the CPA licensure examination

3. lo charge of formulating accounting standards

--------- 4. In charge of regulating the operations of pannerships.

corporations and foundations.

5. In charge of regulating the operations of cooperative~

6. In charge with the collection of taxes

7. In c harge of regulating the banks and other financidl

institutio ns operating in the ~hilippines

_ __ _ _ _ _ __ 8. ls the umbrella organizatio n of all organizations ofCPAs in

the Philippines

9. The association ofCPAs in the academe.

_ __ _ _ _ _ _ _ IO The association of CPAs in the government service.

_ __ _ _ __ __ II The association ofCPAs in Commerce and Industry

_ _ _ _ _ __ _ _ 12 The association of CPAs in public practice

--------- IJ The nc,\ accounia ncy law

--------- 14 Is recognized as the father of accounting

_ __ _ _ _ __ _ 15 The countcrpan of AICPA in the Philippines

14-C
1.4 MATCHING TYPE

I. A business organization whose owners are called members.

2. A statement that shows whether the business is profitable or not.

3. A business owned and operated by only one person.

4. A business engaged in buy and sell of goods.

5. A statement that shows the financial position oftlhe business.

6. A business owned by two or more persons.

7. A statement that shows the changes in the capital of the owner.

8. A business organization whose owners are called shareholders.

9. A business engaged in the conversion ofraw material into finished

product.

_ _ 10. A business engaged in the provision or rendering of services for a certain fee.

A. Merchandising H. Income Statement

B. Taxation l. Corporation

C. Manufacturing J. Cooperative

D. Servicing K Single Proprietorship

E. Statement of Changes in Owner's Equity l. Partnership

F. Statemeni of Cash Flows M . Auditing

G. Balance Sheet

14-D
False
True
True
True

True

False

True

True
False

False
False
False

False
False
True

100,000 49,500

11,000 48,600 0

8,000 (12,000)
A DR A DR
E DR L CR
I CR I CR
A DR E DR
E DR C CR
E DR A DR
C CR L CR
I CR E DR
A DR E DR
E DR I CR
L CR
L CR
C DR
E DR
L CR
 Cash Capital
Telephone Expense Cash
Cash Loans Payable
Furniture & Fixtures Accounts Payable
Cash Service Income

Drawings Cash
Cash Rent Income
Notes Receivable Service Income

Accounts Payable Notes Payable

Cash Mortgaged Payable
Cash Notes Receivable
Accounts Payable Cash
Cash Accounts Receivable
Advertising Expense Cash

Accounts Payable Notes Payable

Machinery Cash
Office Equipment Capital

Accounts Payable Notes Payable

Salaries Expense Cash
Drawings Furniture & Fixtures
Miscellaneous Expense Cash
Notes Payable Cash
Office Supplies Expense Cash

Accounts Receivable Service Income

Interest Expense Cash

Cash Notes Receivable

Supplies Cash
Legal Expenses Cash
Cash Miscellaneous Income
Taxes and Licenses Cash
 Accrued Expense
Unearned Income
Prepaid Expense
Accrued Income
Depreciation

Impairment Loss
Interim Financial Statement

Accounting Period

Current Asset
Long Term Liabilities
Non Current Asset

Current Liabilities
Fiscal Year

Annual Year

Calendar Year
Name
- - - - - -- - ---------- - Date - - - - - --
Professor
---- - - -- - -- -- - ---- Score- -- - - --
EXERCISE4

4.1 TRUE OR FALSE

I. There is only one book of original entry which is the general journal.

_ __ 2. There is only one ledger which is the general ledger.

___ 3. A preliminary trial balance is a list of all accounts which are found in the
general ledger.

___ 4. Adjusting entries are prepared at any time during the accounting period as the
need arises. '

5. A,worksheet should be prepared before the financial statements.

_ _ _ 6. All accounts in the general ledger are closed by means of closing entries.

_ __ 7. To rule the ledger means getting the total of the debit and credit of each
account in the general ledger.

_ __ 8. The post-closing trial balance will show all the adjusted balances of the
different accounts in the general ledger.

___ 9. The opening entry is optional hence can be done away with.

___ 10. Reversing entries are generally made for all accruals and for all deferrals if
the expense method and the income method are used.

_ _ _ 11 . Correcting entry is synonymous to adjusting entry.

___ 12. Reversing entries are prepared for consistency in the recording of the
payment expenses and the collection of income.

_ _ _ 13. Only actual bad debts are adjusted at the end of the accounting period hence,
estimated bad debts are not recognized.

Unused supplies can be considered as prepaid expense.

- - - 14.
The account Depreciation Expense is accumulated on a period to period
- - - 15. basis.

106-A
4.2 MULTIPLE CHOICES

I. Which of the following journal entries can be eliminated?

a. Opening entry c. Reversing entry
b. Closing entry d. Adjusting entry

2. Which of the following need not be reversed assuming they are recorded using the
conventional manner?
a. Supplies Unused c. Accrued expenses and income
b. Prepaid expenses and unearned income d. None of the given

3. Which of the following accounts are closed by means of closing entries?

a. Nominal accounts c. Both a) and b)
b. Real accounts d. Neither a) nor b)

4 . The worksheet can be useful in which of the following?

a. Determining the net income or loss. c. Preparing the opening entry
b. Preparing the post-closing trial balance. d. AJI of the given

· 5. What is the effect of not reversing an adjusting entry debiting Prepaid'Rent

and crediting Rent Expense in the next accounting period?
a. The prepaid rent is understated. c. Rent expense is overstated
b. The prepaid rent is overstated. d. Cannot be determined.

6. What would be the debit to record the payment of rent expense which was
accrued in the previous period and no reversing entry was made in the next period?
a. Rent Expense c. Prepaid Rent
b. Rent Payable d. Unearned Rent

7. An adjusting entry was made aJ the end of the period debiting Adver1isi11g Expense
and crediting Prepaid Advertising. What would be debited in the reversing entry?
a. Prepaid Advertising c. Accrued advertising
b . Advertising Expense d. No reversing entry required

8. Which of the following adjustments need to be reversed?

a. Impairment loss c. Accruals
b. Depreciation d. None of the given

9. What accounts wili be reflected in the post-closing trial balance?

a. Real accounts with balances c, All accounts with balances
b. Nominal accounts with balances d. All accounts with adjustments

Io. Which of the following journal entries are intended to update the books?
a. Opening entries c. Adjusting entries
b . Closing entries d . Reversing entries

106-B
PROBLEMS

A. Shown below is the adjusted trial balance of Nelson Ricafon. CPA

Nelson Ricafon. CPA

Adjusted Trial Balance
December 3 I .200C

Accounts Credjt

Cash P 30,250 p
Accounts Receivable 60,000
Notes Receivable 20,000
Accrued Interest Income 200
Unused Office Supplies 1,350
Prepa1d Insurance l ,800
OAice Equipment 91 ,600
Accumulated Depreciation 27,480
Accounts Payable 9,250
Accrued Rent Expense 5,000
Accrued Salary Expense 4,400
Unearned Fees 6,500
Nelso,n Ricafon.Capital 64,880
Nelson Ricafon. Drawing 40.400
Fees Earned 449,500
Re,,tal Income 6,000
Salary Expense 219,900
Rent Expense 60,000
Utilities Expense 16,500
Insurance Expense 5.400
Office Supplies Expense 4.050
Deprecia1ion Expense 9.160
Miscellaneous Expense 12,600
Interest Income 200

TOlals e. 57l~10
R[QUIRED:

I Closing Entries
2 Post-C'losing Trial Balance
3 Opening entry in the new book (general journal)
4. Reversing entries in the new book assuming the expense method and the
income merhod were used in recording the prepaid expenses and
precollected income.
107
C:hapler 4 <.:omplotina the Accaullli"I Proc-

B. The fonnal financial statements of Atty. Al Macmod are presented below:

Macmod Law Office
Income Statement
For the Month Ended December 3 l ,200C
REVENUE:
Legal Fees Earned P 39,400
EXPENSES:
Salary Expense P 5,500
Rent Expense 4,000
Ad:vertising Expense 1;200
Utilities Expense 1,500
insurance Expense 500
Supplies Expense 900
Depreciation Expense 625
Miscellaneous Expense 1,000
Interest Expense 600
Net Profit

Macmod Law Office

Balance Sheet
December 3 I,200C
ASSETS LIABILm:ES
Current Assets: Current Liabilities:
Cash P 78,400 Accounts Payable P 30,000
Accounts Receivable 8,900 Accrued Rent Exp. 4,000
Prepaid Advertising 2,400 Accrued Interest Exp. 600
Prepaid Insurance 5,500 Unearned Legal Fees 5,000
Unused Office Supplies 1.600 P 96,800 Total P 39,600
Non-Current Assets: Long-Tenn Liability
Furniture and Equipment P 75,000 Loan Payable 60,000
Less: Accum. Depreciation 625 74,375 TOTAL LIABILITIES P 99,600
OWNER'S EQUITY
Macmod Capital 11,515
TOTAL E!.J1,Ll75 TOTAL ~ 171 175
Macmod Law Office
Statement of Changes in Owner's Equity
For the Month Ended December 31, 200C

AJ Macmod Capital, December I P 60,000

Add: Net Profit 23,575
Total P 83,575
Less: Drawing 12,00Q
Al Macmod Capital, December 31 P ZI 57~
REQUIRED:
1. Reconstruct the closing entries made and prepare the Post-Closing Trial balance.
108
C. The preliminary Trial Balance of Malabo Photo Copying Center for the year
ended December 31. 200E, the end of its accounting period is shown below.

Cash P 37,500
Accounts Receivable 28,000
Notes Receivable 1,000
Furniture and Fixtures 34,500
Photocopying Equipment 220,000
Accounts Payable 26,500
Loan Payable 58,000
Note Payable 3,000
Bugoy, Capital 200,000
Bugoy, Drawing .s,ooo
Service Income· 150,000
Rental Income 8,000
Salaries Expense 32,000
Supplies Expense 60,000
Utilities Expense 10,000
Advertising Expense i5,500
Miscellaneous Expense 2.000

The following adjustments are to be made:

P 500 of the accounts receivable is estimated to be uncollectible.

2. Depreciation on the furniture is estimated to be P 1,200.
3. The Photocopying equipryient should be depreciated by 10%.
4. Unused supplies. P 12,400.
5 Accru~d interest on the notes receivable, P 20.
6. Accrued interest on the notes payable, P 80.
7. Prepaid advertising, P 1,500.
8. Unearned rental income, P 1,000.

REQUIRED:

I. Adjusting entries
2. Post-Closing Trial Balance
3. Opening entry in the new book (general journal)
4 Reversing entries in the new book (general journal)

109
Cllapcc, 4 Complding the Accounling " ' -

D. Shown below is the panial worksheet ofMasagana Massage Clfnic on

December 31,2008.

Trial Balance Adiustments

Accounts DR CR DR CR
Cash p 28,000 p p p
Notes Receivable 12,000
Accounts Receivable 45.000
Allowance for lmoairment Loss 2,300 )) 400
Furniture and Fixtures 36.500
Accumulated Denreciation-F & F 3,000 2) 1,500
Office EQuipment 81,000
Accumulated Deoreciation-0/E 4.200 3) 1,200
Accounts Payable 35.800
Loan Payable 40,000
Note Payable 10,000
Bermudes, Caoital 50,000
Bermudes Drawing 10,000
Service Income 244,000
Rental Income 6,000 8) 2,000
Interest Income 200 6) 120
Salaries Expense 80,000 9) 4,000
Rent Expense 46,000
Supplies Expense 24,S00 4) 10,400
Advertisini;t Expense 10,300 7) 1,800
Miscellaneous Expense 5,000
Interest Expense 400 5) 30
Insurance Expense 12,000
Taxes and Licenses Expense 4,800
Totals P 395,500 P 395,500
lmoairment Loss 1) 400
Depreciation-Furniture and Fixtures 2) 1,500
Depreciation-Office Equioment 3) 1,200
Supplies 4) 10,400
Prepaid Interest S) 30
Unearned Interest Income 6) 120
Prepaid Advertisins.t · 7) 1,800
Unearned Rental Income 8) 2,000
Salaries Payable 9) 4,000
Totals p 21 ,450 P 21,450

REQUIRED:
I . Post-Closing trial balance
2. Opening Entry in the new book (general journal)
3. Reversing Entries in the new book (general journal)

110
Name Date - - - - - - -
- - - - - -- -- - - - - - -
Professor Score-
- - -- - - -- - - - - -- - - - - -- - --
EXERCISES

5.1 lDENTIFICATION
Sales Discount
I. A discount given to customers for early payment.
Trade Discount
2. An outright deduction from the invoice price
-FOB
- -Shipping
- - -point,
--
Freight Prepaid 3. Terms of shipment where the freight charge~ are shouldered
by the buyer but paid by the seller.

FOB Destination, 4. Terms of shipmem where the freight charges arc shoulde,-ed
- -- -
Freight - -- -
Collect by the seller but paid by the buyer.
FOB Destination,
_ __Prepaid
_ Freight _ _ _ _ S. Tenns of shipme nt where the freight charges are shouldered
and paid by the seller.
FOB Shipping Point,
-Freight
- -- Collect
- - -- 6. Terms of s hipment where the freight charges are shouldered
and paid by the buyer.
Freight Out
7. The cost of transporting the goods incurred by the seller.
Sales Invoice
_ _ __ _ _ _ _ 8 Is a business form which shows the goods or items sold
together with the price. quantity. VAT and terms of sale.
Credit Memo
- - - - - -- - 9 A business form evidencing returns or allowances given to
the customer
Gross Profit
- - - - - - - - I0. The difference between net sales and cost of sales.
Income Statement
by-
- function
- - - - - - 11. The format of the Income Statement where the expenses are
classified as to their function.
Income Statement The manner of presentation of the Income Statement where
-by-nature
- -- - - - 12
method
the expenses are classified according to their nature
Freight In
_ _ _ _ _ _ 13 The cost pajd by the buyer for transporting the goods bought
Ending Inventory
Goods unsold al llhe end of an accounting period
-------- 14
-Borrowing
- - - -Cost
- -- I S. Costs generally incurred in relation to borrowing
such as interest. bank charges. documentary stamps and
other costs.

166-A
5.2 JOURNALIZING

A. indicate the account to be debited and credited for each of the following
transactions of a merchandising business.
DEBIT CREDIT
I. Bought merchandise terms n/60. Purchases Accounts Payable
2. Sold merchandise for cash. Cash Sales
3. Bought tables and chairs on aedit. Furniture & Fixtures Accounts Payable
4. Received a promissory note for Notes Receivables Sales
merchandise sold.
S. Cash sales. Sales
Cash
6. Paid the rent of the office. Rent Expense Cash
7. The owner made an additional Capital
Merchandise Inventory
investment of merchandise.
8. Cash purchases. Purchases Cash
9. Paid freight on merchandise Freight In Cash
bought.
JO. Received cash refund for Purchase Returns and
Cash Allowances
merchandise returned.
l 1. Issued a promissory note for Purchases Notes Payable
merchandise purchased.
12. Paid freight on merchandise sold. Freight Out Cash
13 . Paid cash for merchandise returned. Sales Returns & Allowances Cash
14. Received cash from a tenant Rent Income
Cash
as payment of rental.
l S. The owner withdrew merchandise Drawings Merchandise Inventory
for his personal use.
16. Received a credit memo for
merchandise returned. Accounts Payable Purchase Returns & Allowances
17. Paid cash for merchandise retum,:d.Sales Returns & Allowances Cash
18. Paid &eight on the tables bought. Furniture and Fixtures Cash
19. Issued a credit memo for merchandise
returned. Sales Returns & Allowances Accounts Receivables
20. Returned defective tables bought
on account. Accounts Receivables Furniture & Fixtures
21 . Issued a promissory note in
payment of an account which is due. Accounts Payable Notes Payable
22. A buyer paid freight on terms
FOB-destination-freight collect. Accounts Payable Cash
23. Received a promissory note as
payment of an account due. Notes Receivables Accounts Receivables
24. A seller paid freight on terms
FOB-shipping point, freight prepaid. Accounts Receivables Cash
2S. The owner paid the tuition of her
daughter Q\Jt of the cash withdrawn
from the office. Drawings Cash

166-B
Name Date
- -- - - - -- - - -- - - - - -- -------
Professor - - - - - - -- -- - -- -- - Score- - - -- - -

B. The following purchases were made by STAREX Trading during November:

Trade
List Price Discount Terms Amount
a. p 180,000 COD DR Purchases
CR Cash p 180,000
b. P 230,000 n/30 DR Purchases
CR Accounts Payable p 230,000
C. p 125,000 60-day note DR Purchases
CR Notes Payable p 125,000
d. P 200,000 8% Cash DR Purchases
CR Cash p 184,000
e. P 360,000 100/4 n/EOM DR Purchases
CR Accounts Payable p 324,000
f p 70.000 5%&2% 2/ 10,n/30 DR Purchases
CR Accounts Payable p 65,170

C. The following sales were made by Torpedo Trading during December:

Trade
List Price Discount Terms Amount
g. P 400,000 n/60 DRAccounts Receivables
CR Sales p 400,000
h. p 50,000 COD DR Cash
CR Sales p 50,000
I. P 720,000 4% 30-day note DR Notes Receivable
CR Sales p 691,200
J. P 100,000 6%&3% n/45 DRAccounts Receivable
CR Cash p91,180

5.3 Write the word BUYER or SELLER on the space provided.

Who should Pay Who will pay

Terms of Shipment the freight charges the freight charges

a. FOB-Shipping Point-Freight collect _ Buyer

_ __ __ Buyer

b. FOB-Destination-Freight prepaid Seller Seller

c. FOB-Shipping Point-Freight prepaid _Buyer

_ __ __ Seller
Seller Buyer
d. FOB-Destination-Freight collect

166-C
5.4 Computation of the Amount Collected

Compute the amounts collected from the following sales reponed by Lincoln
Traders during 200D:

invoice Date Terms List Price Date Collected Amount

a. Jan. 06 20'/4 TD, COD P 120,000 Jan. 06 p 96,000

b. Feb. 02 5% TD, n/30 150,000 Feb. 28 142,500
C. March 01 10% & 5% TD, n/30 300,000 Mar. 31 256,500
Cash = 196,000, Sales Discount =
d. Apr. 12 2/IO, n/30 200,000 Apr. 22 4000, Accounts Receivables = 200k

e. May 03 2/10,1/15, n/40 350,000 May 18 Cash = 346,500, Sales Discount = 3,500,
Accounts Receivables = 350,000
f. June 12 2/EOM, n/60 125,000 July 02 125,000
g. July 04 2/10, EOM 140,000 Aug. 09 140,000
Cash = 141,120, Sales Discount = 2,880,
h. Aug. 07 10% TD,2/IO,n/30 160,000 Aug. 17 Accounts Receivable = 144,000

I. Sept. 01 3/IO, 2/15, n/45 180,000 Sept. 17 180,000

J. Oct. 11 2/5, n/30 250,000 Oct. 17 250,000
Cash = 173,250, Sales Discount = 1,750,
k. Nov. 15 1/EOM. n/60 175,000 Nov. 30 Accounts Receivables = 175,000

I. Dec. 01 4/ 15, n/45 135,000 Dec. 16 Cash = 129,600, Sales Discount = 5,400,
Accounts Receivables = 135,000

5.5 A. Computation of the Net Profit

Compute the missing items from the following independent cases.

Cost of Gross Operating Net Profit

Case ~ Sales Profit Expenses · <Net Lou)
a. P 172,300 (I) p P 84,600 (2) p P 33,000
b. (3) 142,000 150,000 108,000 (4)
C. 345,000 ~82,000 (5) (6) (13,000)
d. 250,000 (7) (8) 130,000 30,000
e. 240,000 (9) ( 10) 150,000 (30,000}

B. Computation of the Cost of Sales

Compute the missing items from the following independent cases.

Case I Case2 Case3 Case4

Beg. Inventory P 28,000 P IS,000 P 20,000 (4) p

Purchases 74,000 80,000 (3) 88,000
Freight In 1,000 2,000 5,000
Purchase Returns 8,000 4,200 4,000
Purchase discount 1,500 850 1,200 3,000
Ending Inventory 40,000 (2) l0,000 25,000
Cost of Sales (I) 57,950 50,800 73,000

166-D
(,...,.., ' Accounllng r,. Mcrdand,.,,. 0111,nna

PROBLEMS

A. The following selected transactions pertaining to purchases were completed during

March.
March 2 - Bought merchandise from Levi Company with a list price P 18,000
tenns COD with a10% trade discount exclusive of freight ofP 1,200
which was also paid.
3 - Rccurned defective merchandise to Levi Company P l,SOO and was
given a cash refund.
6 - Purchased merchandise from Cortan Traders, P 10,000 terms 2/10, n/30
and paid freight of P SOO.
1 - A credit memo was received ftom Conan Traders for defective
merchandise returned, P 2,000.
9 - Made a partial payment to Cortan Traders, P S,000.
16 - Paid the account of Cortan Traders in full.

REQUIRED: Journalize the above transactions (without explanation).

B. The following selected transactions pertaining to sales were recorded for the month
of August:
August 3 - Cash sales, list price, P 50,000 with trade discount of8°/4 and 5%
Freight paid, P 4000.
6 - Gave a cash refund for defective merchandise returned. P 2,000.
7 - Sold merchandise to Leony valued at P 35,000 terms, 2/10, 1/lS, n/45.
8 - Defective merchandise returned by Leony, P 5,000 for which a credit
memo was given.
11 - Leony made a partial payment of P 20,000.
22 - Collected the account ofl..eony in full .

REQUIRED: Give the journal entry (without explanation) to record the above
transactions.

C. Manila Trading bought merchandise from Davao Trading. P 4S0,000 exclusive of

freight charges of P 12,000 which was paid by the right party.

REQUIRED: In parallel column, record the above transactions in the books of

the buyer and seller under each of the following independent terms
of shipment:

1. FOB - Shipping Point - Freight Collect

2. FOB • Shipping Point - Freight Prepaid
3. FOB - Destination - Freight Collect
4. FOB - Destination - Freight Prepaid

167
 Accoull,ng ,,. Mcrchandi11,. Oulmcu

D. The following selected transactions occurred during the month of October for Carlo,
Trading:
Oct. I - Bought goods costing P 6,500 on credit from Marimar Trading terms
2/10, n/30.
2 - Sold merchandise on account to Billy Trading, P 5,000 terms 3/10
EOM.
3 - Paid freight on tbc purchase made last October I, P 300.
4 - Sold merchandise for cash P 12,600.
4 - Paid freight on the above sale, P 256.
5 - Bought goods with a list price of P 5,000 terms COD with trade
discount of 8%.
6 - Received a 30-day 6% note from Cortez for merchandise sold. P 6,000.
6 - Bought tables on account from Lourdes Furniture, P 4,000 terms 3/20,
n/40.
7 - Cash sales, P 12,500.
8 - Cash purchases, P 8,400.
8 - Bought goods from Zorro Trading, P 10,000 terms 2/ 10 EOM.
8 - Issued a 60-day 6% note for P 2,000 for merchandise bought from Oca
Trading.
10 - Bought goods from Alex Company, P 7,000 terms 3/10, 2/ 15, n/45.
11 - Sold goods to Costa Enterprises, P 11 ,000 terms 1/ 10. n/30.
12 - Received a cash refund for merchandise returned to a supplier. P 650.
13 - Gave a cash refund to a customer for defective merchandise returned,
P 800.
14 - Bought merchandise from Rumars with a list price of PI0,000 terms
2/10, n/30 with trade discount of 5% and 2%.
21 - Collected the account of Costa Enterprises in full (see transaction
dated Oct. I I).
24 - Paid the account of Alex Company in full (see transaction dated Oct.
10).
25 - Sold merchandise to Santos, terms COD with a list price of P 8,000
with trade discount of 10% and 5%, exclusive of freight charges of
P 230.
25 - Returned defective tables to Lourdes Furniture (see transaction dated
Oct. 6), P 500.
25 - Returned defective merchandise to Zorro Trading, P200 (see
transaction dated Oct. 8).
27 - Paid the account of Zorro Trading in full (see transactions dated Oct. 8
and 25).
28 - Collected the note ofConez together with the interest (see transaction
dated Oct. 6).
28 - Paid the note issued to Oca Trading in full together with the interest
(see transaction dated Oct. 8).
29 - Billy Trading returned goods. P 1,000 (see transaction dated Oct. 2).
30 - Billy Trading paid its account in full (see transactions dated Oa. 2 and
29)

REQUIRED: Journal entries (without explanation).

168
E. Tommy Abad is the owner of a small grocery. The trial balance on Novembe 30.
20CY is reproduced below.

Accounts DR CR
Cash p 23,500 p
Ac.counts Receivable 18.000
Allow. for Jmpainnent Loss 500
Furniture & Fixtures 12,000
Accum. Depreciation - Furn.& Fixt. 1,200
Office Equipment 27,500
Accum. Depreciation - Office Eqpmt. 1,500
Merchandise Inventory 22,000
Accounts Payable 18,500
T. Abad Capital 65,300
T Abad Personal I0,000
Sales 93,000
Purchases 21,000
Salaries Expense 19,000
Supplies Expense 1,000
Rent Expense 13,000
Utilities Expense 8,000
Miscellaneous Expense 5,000
PI80000 e..,ts_o ooo
The following summary transactions took place in December:

I. Cash sales. P 40,000 and paid freight of P 1,200.

2. Cash purchases, P 24,000 exclusive of freight of P 800.
1

3. Collection of accounts, P 5,600.

4. Payment of accounts. P 8.000.
5. Issued credit memo 10 a customer for merchandise returned, P 1,580.
6 Received a credit memo fi'om a supplier for merchandise returned. P 2,000.
7 Payment of account P 4,000 with discount of2%.
8 Collection of account P 4.500 with 3% discount.
9 Sales on acco unt, P 12,000.
I 0. Purchases on account, P 8,600.

REQUIRED:

Journal entries (without explanation).

2. Post 10 the T accounts.
3. Preliminary trial balance as of December 3 1. 20CY

169
F. Sho"11 below arc the accounts with open balances appearing in the general ledger
of Liwayway Trading as at December 31 . 200G before adjustments·

Furniture & Fixtures p 3 1.000 Office Equipment p 14,000

Rent Income 5.000 Rent Expense 24,000
Supplies Expense 2.200 Notes Payable 21 ,875
Ligaya Capital ')
Salaries Expense 99,550
Cash 62.875 Purchase Discount 5,010
Allow for Impairment Loss 2. 150 Freight In 5,41 5
Advenising Expense 3,000 Accounts Payable 94,750
Accum. Dep ' n - Furn. & Fixt. 2,000 Ligaya Drawing 9,500
Notes Receivable 74.250 Sales 572,875
Insurance Expense 5,250 Sales Returns 11 ,000
Accounts Receivable 17 1. 100 Sales Discount 6,400
Merchandise Inventory- Jan. I 60,900 Purchases 390,750
Accum Dep·n.-Office Eqpmt. 1,000 Purchase Returns 5,780

REQUIRED: Prepare the preliminary trial balance. Arrange the accounts in their
correct order.

G. The fo llowing information is taken from the adjusted trial balance of John Trading
on December 3 I . 200F .

Beginning Inventory p 48.000 Purchases p 118,000

Financing Cost 10,500 Sales Discount 2,600
Purchase Returns & Allowances 32.000 Sales 420,000
Ending Inventory 22,000 Distribution Costs 48,000
Sales Retwns & Allowances 5.000 Freight In 7,400
Administrative Expenses 170,700 Purchase Discount 1.500

REQUIRED: Prepare the Income Statement using both the functional and natural
format

H. The following information was obtained from the records of Diwata Traders:

Propeny. Plant & Equipment P 350.000 Accounts Payable P 254,000

Allow for Impairment Loss 5.000 Querubin Capital 11 9,000
Cash 120.000 Loan Payable (long-term) 500,000
\1crchandise Inventory 265.00D Accumulated Depreciation 48,000
Accounts Receivable 185.000 Prepaid Expenses 12,000
Accrued Expenses 6.000

REQUIRED: Prepare a condensed Balance Sheet in good form using the

traditional format and the format as per the recommendation of the
International Accounting Standards.
170
I. Below are the unadjusted general ledger accounts of Superb Appliance Store for the
current year

Cash P 277.830 Purchases P 2,625.250

Notes Receivable 60.000 Purchase Rel. & Allow. 26,250
Accounts Receivable 275.000 Purchase Discount 39,160
Allow for Impairment Loss: 2.000 Transportation In 60,250
Merchandise Inventory - beg. 1,578,650 Sales Salaries 21 S,675
Delivery Equipment 500,000 Advertising Expense 33,000
Accumulated Depreciation- DIE S0,000 Commission Expene · 75,2S0
Store Equipment 150,000 Delivery Expense I I 2,500
Accumulated Depreciation- S/E 15,000 Misc. Selling Expenses 12,450
Office Equipment 50,000 Office S_alaries 125,900
Accumulated Depreciation- 0/E l0,000 . Rent Expense 110,000
Accounts Payable 976,450 Insurance Expense 24,000
Notes Payable 100,000 Office Supplies Expense 22,250
C Kat Capital 1,503,945 Taxes & Licenses 10,2S0
C Kat Drawing 60,000 Misc. General Expenses 6,200
Sales 3,760,600 1.ntcrest Income 1,200
Sales Returns & Allowances 37,SOO Interest Expense 12,000
Sales Discount 50,650

Superb Appliances Store is on its second year of operations. The capital of

C Kat at the beginning of the current year was P 1,405,945.
Below are the data needed for adjustments at December 31 :
The physical inventory of merchandise as of December 3 I amounted to
P 1,650.620.
1 Interest at 12% per annum on the P 60,000 Nole Receivable dated October 2,

was due
3 4 months insurance was paid on November I of the current year.
4 Supplies inventory at the end of December amounted to P 4,850.
5 The Delivery Equipme111 and S1ore Equipme111 have an estimated useful life of
ten years
6. Office Equipmelll has an estimated useful life of five years.
7 Accrued Sundry Payable:r as of December 3 1 were as· follows:
Unpaid Sales Salaries. P 10.000 Accrued Rent Expense, P 10,000
Unpaid Office Salaries. P 5,000 Accrued Advertising Expense, P 3,000
8 It is estima!ed that 1% of sales will be uncollectible.
REQUIRED:
a The adjusting journal entries at Dec. 31 of the current year.
b A ten-column Worksheet for the year ended Dec. 31 of the current year.
c. An Income Statement for the year ended Dec.3 1 of the current year using two
formals.
d A Statement of Changes in Owner's Equity for the year ended Dec. 3 1 of the
current year.
e A Balance Sheet as of Dec. JI of the current year.
f. The closing journal entries at Dec. 31 of the current year.

17 I
 i\cc<Mlllling r.. M•dlandilb,g a---

J. Shown below is the preliminary trial balance ofBulaklak Trading on December 31,
200G:

Cash P 67,075
Note Receivable 70,000
Accounts Receivable 171,100
Merchandise Inventory, Jan. I 60,900
Furniture & Fixtures 31,000
Office Equipment 14,000
Notes Payable 20,000
Accounts Payable 94,750
Luningning Capital 265,000
Luningning Drawing 9,S00
Sales 572,875
Sales Returns 11,000
Sales Discount 6,400
Purchases 390,750
Freight In 5,415
Purchase Returns 3,630
Purchase Discount 6,885
Salaries Expense 99,550
Rent Expense 24,000
Insurance Expense 5,250
Office Supplies Expense 2,200
Rental Income 5,000

Note: The initial investment ofluningning was only P 100,000.

The following are the adjustments to be made:

I. Merchandise Inventory, Dec. 31, P 76,000.
2. The note receivable was received December 16 with interest of 12%. The due
date is January 15.
3. Bad debts are estimated at 1% of the balance of accounts receivable.
4. The furniture was acqui;ed on July 1, 200G. It is depreciated at the rate 12%
per annum.
5. The office equipment was acquired February 1, 200G. It has an estimated
useful life of IO years with a salvage value of P 2,000 at the end of its life.
6. The note payable was issued Nove:mber I. 200G with interest at 6% payable
on January 31, 200H, the maturity date.
7. Unused supplies, P 890.
8. Unpaid insurance, P 4,000.
9. The rental income is for 5 months and was received on December I, 200G.

REQUIRED:
a. 8-column worksheet
b. Financial Statements

172
K. The worksheet of Ace Hardware. owned and operated by Ace Borrcl. showed the
following adjusted trial balance on December 31. 200C. the end of its third year of
operations

Cash P 130,11 5 Purchases P 1,320,500

Notes Receivable 30,000 Freight In 30.875
Accounts Receivable 98,150 Purchase Returns & Allow. 2.585
Allow. for lmpainnent Loss 4.835 Purchase Discount 20.000
Merchandise Inventory, Jan. I 785,3 45 Sales Salaries 11 5.600
Prepaid Insurance 6,000 Advertising Expense 18.000
Unll!ed Supplies 3,750 Freight Out 12.260
Store Equipment 120,000 Depreciation-Store Eqpt 12.000
Accum. Oep' n. - Store Eqpmt. 36,000 Misc. Selling Expenses 17.650
Office Equipment 60,000 Office Salaries 65,900
Accum. Dcp' n.-Office Eqpmt. 18,000 Rent Expense 48,000
Accounts Payable 371.535 Insurance Expense 9,000
Notes Payable 50,000 Supplies Expense 8,650
Ace Borre! Capital 527.030 Depreciation - Office Eqpt 6.000
Ace Borre! Drawing 48,000 Impairment Loss 2.5 15
Sales 1,950.34 5 Misc. General Expenses 1,800
Sales Returns 4.020 Interest Income 1,200
Sales Discount 20,800 Interest Expense 6.000

Note. Ending inventory of merchandise. P 715,250.

REQUIRED:

a Income Statement (use 2 forma ls) for the year ended December 31. 200C.

b Statement of Changes in Owner 's Equity. (Assume that the capital of

Ace Borrel on January I was P 486. 135).

. c. Balance Sheet (Assume that only P 10,000 of the Notes Payable is a current
liabili1y)

d Closir:ig journal entries.

e Post-Closing Trial Balance

f Opening entry in the new books

173
 Acc,,u,.ing liw Mcrchand111ng U111nat

L An abstract of the partial worksheet ofMaragondon Trading on September 30, 200C,

the end of its fiscal year is reproduced below.

Preliminary Trial Balance Adjusted Trial Balance

IIB. CR DR CR
Cash p 62,825 p p 62,825 p
Notes Receivable 74,250 74,250
Accounts Receivable 179,700 179,700
Allow. for Impairment Loss 8,600 14,376
Merchandise Inv. - beg. 60,900 60,900
Furniture & Equipment 56,250 56,250
Accumulated Depreciation 11 ,250 16,875
Notes Payable 21 ,875 21 ,875
Accounts Payable 87,750 87,750
Belvis Capital 265,000 265,000
Belvis Drawing 8,500 8,500
Sales 587,175 587,175
Purchases 408, 150 408,150
Salaries Expense 107,165 107,165
Rent Expense 24,000 18,000
Insurance Expense 5,250 5,250
Rental Income 6,000 2,000
Interest Income 1,490 l ,815
Interest Expense 6,150 2,362
Totals f 282 J.A.O I!.. 982 H Q
Merchandise Inv. - end 76,000
Income & Expense Summary 76,000
Impairment Loss 5,776
Prepaid Rent 6,000
Interest Receivable 325
Interest Payable 212
Depreciation 5,625
Unearned Rental Income 4 000
Totals P 1.071.Ql.8 PI QZZ078

REQUIRED:

a. Reconstruct the adjusting entries made.

b. Closing entries.
C. Post-closing trial balance.
d. Opening entry in the new books.
e. Reversing entries in the new books.

174
 Ai.'1.•ow111ng for Mcrd1.uxfo,lng Uu,mcss

M. Cesar Cifra started his merchandising business on December I. 200E. The following
transactions transpired during December·

Dec. I - He invested the following:

Cash P 50,000
Merchandise 30,000
- Paid the following :
Municipal license P 3,500
Rent (3 months) I 2,000
I - Bought computers from Burroughs, terms COD, P 20,000.
- Bought tables and chairs from Nicfur on credit, P 13,650, terms n/60.
3 - Bought merchandise for cash, P 8,700.
'l - Paid freight on the above purchases, P 150.
5 - Sold merchandise for cash P 14,000.
5 - Paid freight on the above sale, P 300.
7 - Purchased merchandise from the following suppliers:
LX Trading, P 10,000terms2/I0, n/30.
Zoilo Trading. P 18,000 terms, EOM. .
9 - Sold merchandise to the following customers:
Llamas Supermarket., P 21 ,000 terms 3/10, n/40.
Rey's Grocery, P 11 ,000 terms n/45.
JO - Borrowed money from PNB, P 15,000 payable in 30 days.
11 - Paid the account of LX trading in fuJI (see transaction dated Dec. 7).
14 - Collected the account of Llamas Supermarket. in full (see transaction dated
Dec. 9).
15 - Received a credit memo for P 2,000 from Zoilo Trading for defective
merchandise returned.
15 - Received advanced rental from a tenant P 6,000.
IS - Rey's Grocery returned defective merchandise. P 3,000, for which a crcdi1
memo was issued.
IS - Paid the following:
Electric Bill P 2,300
Water Bill 3.200
Salaries 12,000
Advertising . 4,500
17 - Salcs·on account to Nelson's Store. P 13,600. terms 2/10,n/45.
19 - Purchases on credit from Baguio Trading. P 14,200. terms n/30
22 - The owner withdrew cash for his personal use. P 2,000.
23 - Received a 60-day 6 % note for merchandise sold from Cara Cruz,
P 3,000.
25 - Issued a JO-day 6% note to Wesley Enterprises. for merchandise bought.
P 2,800
28 - The owner made an additional investment of P 2,300.
29 - Bought office supplies for cash. P 1,200 (charge to expense).
31 - Salaries paid, P 12,000.
175
Chapkr ~ Accoun&ing for Mc:rdlandi• • a.-.

Adjustments to be made on December 31, 200E:

a Merchandise inventory, December 3 1, P 24,000.

b. Depreciation of 12% per annum is to be provided for the office equipment and
furniture.
c. Estimated uncollectible accounts are estimated at 1% of Sales.
d. Accrued interest on the notes receivable.
e . Accrued interest on the notes payable.
f. Prepaid advertising is one half of the amount paid.
g. The tenant's payment is g0<?(1 for 3 ID(?nths.
h. Unused office supplies, P 1,000.

REQUIRED:

1. Record the transactions in the general journal.

2. Post to the T accounts.
3. Prepare the preliminary trial balance on December 31, 200E.
4. Prepare the adjusting entries.
5. Prepare a 10-clumn worksheet.
6. Prepare the Income Statement for the month ended December 3 I, 200E.
7. Prepare the Statement of Changes in Owner's Equity for the month ended
December 31 , 200E.
8. Prepare the Balance Sheet as at December 31, 200E.
9. Prepare the closing entries.
I0. Prepare the post-closing trial balance.
11. Rule the T accounts.
12. Prepare the opening entry for the year 200F in the new books.
13. Prepare the reversing entries in the new books.

176
 lkcnrding 1,.,...,1,.,,,.,..,111 VAr

PROBLEMS

A. Selected transactions (vat exclusive) of Beauty Modem Designs during the month of
December are as follows:
December I - Paid the office rent. P 4,000.
2 - Purchased office equipment on credit, terms 2/10, n/40. P 50,000.
4 - Purchased decorating supplies for cash. P 1,000.
6 - Cash received for decorating services rendered, P 120.000.
8 - Paid insurance premium. P 4,000.
IO - Billed customers for decorating services rendered, P58,000.
11 - Paid the bill ofMERALCO, P 4,500.
12 - Received a bill from PLDT, P l,800.
14 - Bought newspapers and magazines, P 1,200 for cash.
15 - Paid municipal taxes and licenses, P 5,600.
15 - Paid salaries ofthe employees, P 18,000.
I 5 - ·Borrowed money from Security bank, P I 0,000.
30 - Paid Security Bank including interest of P 15. (see transaction dated
Oct. IS).
31 - Received rental from a tenant, P 6,000.

REQUIRED:
l . Record the foregoing transactions (without explanation) in the general journal.
2. Compute the Y.A I payable for the month of October.

B. The following selected transactions were completed by Royal Traders during July of
the current year. VAT is not yet included.
July 1 - Purchased merchandise from Canlubang Trading. P 40,000 terms 2/ 10,
n/EOM. FOB-shipping point. freight prepaid, P I ,250.
IO - Paid Canlubang Trading in full.
13 - Purchased merchandise from Davao Wholesaler Company P 25,000
terms, 1/10, n/30, FOB Destination, freight prepaid, P 4,000.
15 - Returned defective merchandise to Davao Wholesaler Company, P 7,500.
18 - Bought merchandise from Bacolod Trading P 57,500 terms FOB
destination. freight collect, 2/ I 0, n/30. Freight charges amounted to
P 1,200.
23 - Paid Davao Wholesaler Company in full.
28 - Paid Bacolod Trading in full.
30 - Cash purchases from Sorsogon Trading, P I 0,000 terms FOB destination.
freight prepaid, P 1,300.
31 - Paid the following expenses:
Insurance P 4,000
Taxes & Licenses 2,000

REQUIRED:
I . Journal entries without explanation.
2. Compute the total VAT Input
191
 Kc.,orJ,ng Tranu,11on1 wtlh VAT

C. The following selected transactions were co mpleted by Victor Sales Company during
May of the current year. Assume that a 12% VAT is already included in the
applicable transactions

May 2 - Sold merchandise on credit to Peter Go P 3.360 terms 2/ 10, n/EOM, FOB
shipping point.
3 - Cash sales to various customers. P 9.800.
S - Sold goods to Jun Ramos, P 7.280 terms 2/10. n/30, FOB Shipping point,
freight prepaid. P 6 72.
I I - Collected from Peter Go his account in full .
13 - Sold merchandise to Ligaya Grocery P 11 ,760 terms, 1/10, n/30 FOB
destination.
14 - Paid transportation costs on the shipment to Ligaya Grocery, P 448.
14 - Jun Ramos paid his account in full.
17 - Received defective merchandise returned by Ligaya Grocery, P I, 120.
23 - Sold merchandise to Al Monteiro. P 5,376 terms 2/10, n/30, FOB shipping
point. freight prepaid, P 224.
24 - Ligaya Grocery made a partial payment of P 5,000.
29 - Ligaya Grocery paid its account in full .
30 - Al Monteiro paid his account in full .
REQUIRED: Journal entries without explanation to record the above transactions.

D. The following selected transactions were completed by Ultra Trading for the month
of June. Assume that purchases and sales transactions (including returns) are
VAT exclusive but the freight is already VAT inclusive of 12% ..

June I - Bought merchandise from Alex Trading with a list price of P 35,000 and trade
discount of20%. 2/ 10. n/EOM. FOB shipping point, freight prepaid, P 1,344.
3 - Purchased merchandise from Montoya Company, P 17,500, terms. 2/10,
n/30 FOB destination.
S - Sold merchandise 10 Amy Traders. P6.250 terms 2/10, n/30. FOB shipping
po int. freig ht prepaid. P 504
7 - Returned defective merchandise 10 Montoya Company, P 1,500.
9 - Sold goods to Tarro Sales Company. P 9,750 terms 1/10. n/30, FOB
destination
9 - Paid freight on the shipment to Torro Sales Company. P 616.
11 - Paid Alex Trading in full (see transaction dated June I).
11 - Recei ved defective me·rchandise returned by Torro Sales Company.
P 800 (see transaction dated June 9).
11 - Paid Montoya Company in full (see transactions dated June 3 & 7)
11 - Sold goods to Orego n Traders, P 6,550 tem1s 2/ 10. n/30, FOB Shipping
point. freight prepaid. P 560
11 - Amy Traders paid its account in full (see transaction dated June 5).
17 - Bought goods from SM Supermarket. P 27.500 terms n/EOM. FOB
shipping p9in1
17 - Paid transportation charges on the purchases fro m SM Supermarket.
P 1.176
192
 lleoonling T,-Cli<Nawi6 VAT

18 - Sold merchandise to Solomon Company, P 8,750 terms 1/10, n/20 FOB

shipping point, freight prepaid, P 728.
18 - Torro Sales Company paid its account in full (see transactions dated June 9 & 11 ).
19 - Cash purchases. P 12,000.
19 - Oregon Traders paid its account in full (see transaction dated June 11 ).
20 - Received cash for defective merchandise returned, P l, 120 (VAT inclusive).
25 - Made a partial payment to SM Supennarket, P I0,000 (see transaction
dated June 17).
25 - Sold merchandise to Suave Corporation, P 3,250 terms 2/10 EOM, n/60,
FOB shipping point.
26 - Granted price allowance adjustment for defective merchandi~ sold to
Suave Corporation, P 350 (see transl,\Ction dated June 2S).
27 - Paid SM Supermarket in full (see transactions dated June 17 & 25).
30 - Received full payment from Solomon Company (see transaction dated June 18).
30 - C4Sh sales, P 72,000 and paid P 896 freight .

REQUIRED: .
l . Journal entries without explanation to record the above transactions.
2. Compute the VAT payable.

E. The following transactions took place in December, 200F:

·nee. l - Nelson invested P S00,000 to put up a merchandising business.
1 - Bought office tables and chairs from Quality Furniture, P 32,000, VAT
exclusive, terms COD.
I - Paid taxes and licenses to the City Government, P 3,250.
I - Bought computers from Barrano Equipment, P 16,800 VAT inclusive,
terms n/EOM.
2 - Paid 3 months rent in advance to Manansala Realty Corporation, P 4,500,
VAT exclusive.
3 - Bought goods from Runex P 36,500, VAT exclusive, 3/10, n/60.
4 - Cash purchases, VAT exclusive, P 8,000.
5 - Paid freight on the above purchases, P 550, VAT exclusive.
6 - Paid insurance expense, P 12,500, VAT exclusive.
6 - Sold merchandise to ESSO Corporation, P 84,250, VAT exclusive, terms
500/o down and the balance terms n/60.
7 - Paid freight on the above sales, P 6 72, VAT inclusive.
8 - Received a 60-day 6% note for merchandise sold, P I 0,000, VAT
exclusive.
9 - Sold merchandise to Correx Trading. P 56,000,VAT exclusive, terms
2/10, n/60.
IO - Correx Trading returned defective goods, P 16,800, VAT inclusive.
10 - Borrowed money from Metro Bank, P 11,800. Interest of P 800 was
deducted in advance.
11 - Sold goods to Leonard, P 73,920, net of discount VAT inclusive. terms
2/10, n/60 with trade discount of200/o.
11 - Issued a 45-day note P 8,960, VAT inclusive, for merchandise purchased.

193
 M« ording Tl'Wll.ld1.- witll VAT

1S - Correx Trading returned defective goods, P I S,000 VAT exclusive

15 - Paid the following expenses, VAT exclusive:
Meralco bill 6,000
PLOT bill 4,S00
Rent 12,000
Advertising 14,000
16 - Correit Trading made a partial payment of P 20,000.
16 - Leonard ~ defective goods, P 6,000, VAT exclusive.
17 - Paid the note issued on December 11.
18 - Issued a 30-day note for merchandise purchased, P 10,528, VAT inclusive.
19 - Com:x Trading paid its account in full (see tnmsactions dated Dec. 9, I 0,
15, & 16).
20 - Paid the note issued on December 18.
21 - Nelson withdrew cash for his personal use, P I 0,000.
22 - Cash Sales, P 20,SOO, VAT exclusive.
22 - Purchased goods from Collins Co. with a list of price P 35,000 terms 2/10,
n/30 with trade discount of S%, VAT exclusive.
23 - Paid freight on the above purchase, P 3,360, VAT inclusive.
30 - Returned defective tables to Quality Furniture, and received a cash refund
of P 3,360, VAT inclusive (see transaction dated December I}.
30 - Gave a cash refund for defective merchandise returned by customers, P 4,480,
VAT inclusive.
30 - Made a down payment to Collins Co., P 15,000.
31 - Returned defective goods to Collins Co., and received a credit memo for
P 5,600 (VAT inclusive).
31 - Paid the following expenses (VAT exclusive):
Salaries P 12,000
Subscriptions & Publications 1,200
Commission 11,000
Office Supplies 2,400

REQUIRED:

1. Record the foregoing transactions without explanation in the general journal.

2. Post to the T Accounts.
3. Prepare the trial balance.
4. Journal entry to recognize the VAT payable.

194
Chopltr 7 Special Journal, (l,_mw Conuol r.. c.li)

PROBLEMS

A. The following are the purchases and sales transactions of Quality Traders for the
month of June. Assume that the invoice price is still exclusive of 12% value-added tax.
June 2 - Bought merchandise from Hansen Company P 8,500 as per Invoice No.
1167 terms 2/10, n/30.
3 - Sold goods to Ligaya Mamaril, P 13,800 as per Sales Invoice No. 466,
Terms n/45.
6 - Bought goods from Balatao Trading, with a list price of P 6,000 terms
COD with trade discount of I00/o. as per Invoice No. 6543
9 - Cash sales, P 11 ,360 Sales Invoice No. 467.
11 - Issued a 30-day 6% note to Litton Company for merchandise bought,
P 9,000 as per Invoice No. 1212
l S - Received a 45-day promissory note for goods sold to Cirilo Cruz,
P 16,240 as per Sales Invoice No. l021.
18 - Bought goods from Recto Store, P 16,000 terms 500/o down and the
balance on terms n/60.
20 - Sold goods to Luningning Cortez, P 8,000 terms I 00/o down, and the
balance terms, 3/10, n/20. lnvoice No. 1022.
2S - Purchases of tables P 18,700 as per Invoice No. 77867, terms n/60.
30 - Sold merchandise to Joan Cruz, with a list price of P 4,000 terms COD
with trade discount of 6% as per Sales Invoice No. 468.
Note: Round off computations to the nearest peso.

REQUIRED:
I. Record the above transactions in the appropriate special journal.
2. Double rule the totals of the money columns of the special journals.
3. How much is the VAT payable?

8. The following are selected transactions VAT inclusive of Lunatic Corporation:

May I - Bought goods from Lobo Corporation P 16,800 terms n/60 as per Invoice
No. 6675.
5 - Sold goods to Bambi, P 40,320 as per sales invoice no. 907 terms n/60.
7 - Bought goods from:
Linsao Traders. P 11 ,200, terms n/60 Invoice No. 889.
Bonuan Company, P 6,720, terms EOM, Invoice No. 5432.
Macky, Inc. P 5,040, net of trade discount of8%. Check# 33012. Inv.
No. 8066.
17 - Sold merchandise to: .
Max . P 26,880 terms 8% 60-day note, Invoice No.908.
Bruno. P 15,680, net of trade discount of 5%,
Invoice No. 909. OR # 8406.
David . P 6,944 terms 2/10, n/30, Invoice No. 910.
REQUIRED:
t . Record the above transactions in the appropriate special journal and double rule
the totals of the money columns.
2 . How much is the VAT payable?
221
 Special Journal, (llllcrml ConltOI fur C&lli)

C. Selected transactions (VAT exclusive) of Dennis Traders for the month of August, its
second month of operations. were as follows:

Aug. 2 -Dennis made an additional investment of P 40,000 as per OR No. 503.

3 -Cash sales, P 12,500 Inv. No. 306, OR No. 504.
9 -Sold merchandise to Janno, P 16,000 terms 2/10, n/30, Inv. No. 307.
10 -Sold merchandise to Gibbs, P 3,400 terms n/45, Inv. No.308.
11 -Received rental from a tenant, P 3,000 as per OR No. 505.
12 -Sold goods to Rochelle with a list price of P 5,600 terms n/45 with trade
discount of 10% and 5%.
12 - Collected the account of Janno in full. OR No, 506 ( see transaction dated
Aug. 9).
15 - Cash sales, with a list price of P 13,000 with trade discount of 5%
Inv. No. 309. OR No. 507 .
16 - Received a 60-day 6% note P 4,000 for merchandise sold to Sunshine
Inv. No. 310.
17 - Sold merchandise to JJonna, P 1,500 terms 1/15, n/30 Inv. No. 311.
17 - Returned defective tables bought from Nicfur, P 4,500 and received a
cash refund as per OR No 508.
18 - Borrowed money from Banco de Oro, P 30,000, OR No. 509.
20 - Donna returned defective goods, P 500 as per CM No. 654.
22 - Sold merchandise to Michelle, P 13,000 terms 50% down, and the balance
n/60. Inv. No. 312 OR No. 510
23 - Sales on account to Felipe, P 7,000 terms 2/5, n/15 Inv. No. 313.
29 - Collected the note of Sunshine together with the interest of P 9,
OR No.5 I 1 (see transaction dated Aug. 16).
30 - Returned defective goods to Ace trading, and received a cash refund of
P 1,000 as per OR No. 512.
31 - Collected the account of Felipe in full as per OR No. 5 l 3 (see transaction
dated Aug. 23).
31 - Sold goods to Malgerose, P 3,650 terms n/60 Inv. No 314.
31 - Donna paid her account in full as per OR No. 514 (see transactions dated
Aug. 17 & 20).
31 - Sold additional merchandise to Michelle P 6,700 terms 2/10, n/30
Inv. No. 315.
3 1 - Michelle made a partial payment of P 2,000 as per OR No. 5 I 5 (see
transac.tion dated Aug. 22).
31 - Sold merchandise to Lito, P 8,600 terms 40% down and the balance, n60
Inv. No. 316, OR No. S16.
Note: Round off all computations to the nearest peso.

REQUIRED:

J. Record the above transactions in the appropriate special journal and double
rule the totals of the different money columns.
2. Post to the Accounts Receivable subsidiary ledger.
3. Prepare a schedule of Accounts Receivable.
222
0..-7 Special Joumal• (l•crnaJ Control fm Cub)

D. Mitz Santos, owner ofMitz Trading completed the following selected transactions
for the month of July of the current year. The company is using special journals.
All transactions which are subject to VAT are already VAT inclusive.

July I - Issued a 60-day 6% note amounting to P 6, 720 for goods purclwed from
Jovi Traders as per Invoice No. 2322.
2 - Issued Check No. 2034 to Manila Bulletin for a 3-day advertisement in the
newspaper, P 9,520.
4 - Cash purchases, P 10,080 net of trade discount of 10%. Checlc No. 2035.
Inv. No 6655.
5 - Merchandise purchases:
Dalton Corporation - P 7,280 terms 2/10, n/30. Inv. No. 7786.
Moonwalk, Ltd. - P 5,040 tenns 3/15, n/60 Inv. No. 88765.
6 - Paid 3 months rent to Ace Realty P 14,000. Check No. 2036.
7 - Issued Check No. 2037 to Malou Traders. P 3,920 for defective goods
returned.
9 - Returned defective goods to Dalton Corporation, P 6 I6.
9 - The owner withdrew cash for his personal use, P 20,000 (Check No. 2038).
10 - Purchases made on this date:
Merchandise - Diamond Store, P 17,360 tenns n/40, Inv. No. 99870.
Computer - Gorgon Company , P 12,320 terms COD, Inv. No. 3366
Check No. 2039.
11 - Paid municipal licenses to Pasay Ciry, P 3,235 (Check NO. 2040).
12 - Paid salaries of the employees, P 36,780 (Check No. 2041 ).
15 - Established a petty cash fund, P 5,000 by issuing Check No. 2042.
16 - Paid Dalton Corporation in full (Check No. 2043). (see transactions dated
July 5 & 9).
17 - Made a partial payament to Moonwalk., Ltd., P 2,000 (Check No. 2044)
20 - Purchases made on this date:
Goods - Diana Corporation, P 12,544 tenns 50% down (Chec)c No.
2045). Inv. No. 80461.
Supplies - National Bookstore, P 2,744 tenns n./30.
Goods - Reebok Traders, P 7,392 terms 2/10, n/30. Inv. No. I 161.
21 - Bought additional merchandise from Diana Corporation, P 7,056,
net of 5% trade discount, terms, n/45. Inv. No. 80480.
24 - Cash purchases, P 1,848 (Check No. 2046). Inv. No. 410 I.
28 - Paid the.note of Jovi Traders together with the interest of P 27 by issuing
Check No. 2047 (see transaction dated July I).

REQUIRED:

I. Record the above transactions in the appropriate special journal and double rule
the totals of the money columns.
2. Post to the Accounts Payable subsidiary ledger.
3. Prepare a schedule of Accounts Payable.

223
 Spccoal Journal• (Internal Cootrol rm Caob)

E. Alex Kadyan, owner of Mabuhay Trading, started operations last year."'For the month
of January of the following year, the following transactions were completed:

Jan. 1 - Issued a 30-day 6% note to Batangas Company for merchandise bought as

per Invoice No. 456, :P 2,400, VAT exclusive.
1 - Bought goods from Abra Trading, P 14,000, VAT inclusive, terms 2/10,
n/30 as per Invoice No. 8054.
2 - Received a 15-day 6% note from Chona de Leon, P 9,000 VAT exclusive
for goods sold as per Invoice No. 207.
2 - Bought _office tables and chairs from Quality Furniture, P 8,600 VAT
exclusive; tcnns n/60 as per Invoice No. 77867.
3 - Paid municipal licenses to Pasay City, P 2,345. (check no. 3512).
3 - Returned goods to Abra Tr_ading, P 3,360 VAT inclusive.
3 - Sold goods to Rica Parrel, P 30,240 VAT inclusive, terms 4/10, n/60 as per
Invoice No. 208.
4 - Cash sales, list price, P I0,000 VAT exclusive with 10% trade discount as
per Invoice No. 152 (OR No. 951 ).
4 - Rica Parrel returned defective goods, P 5,000 VAT exclusive.
5 - Cash purchases, P 4,000 VAT exclusive. (check no. 3513). Inv. No. 8036.
5 - Sold goods to Rubeo Pineda, P 8,000 VAT exclusive terms 2/10, n/30 as per
Invoice No. 209.
5 - Paid Abra Trading partially, P 4,000 (check no. 3514).
5 - Bought goods from Agusan Traders, P 10,650 VAT exclusive, terms n/60
as per Invoice No. 2019.
5 - Bought goods from Bataan Company, P 4,480 net of 8% trade discount VAT
inclusive, terms COD (check no. 3515). Inv. No. 3636.
5 - Merchandise purchased from Aki an Company, P 12,800 VAT exclusive,
terms 2/5, n/15 as per Invoice No. 6777.
6 - Alex Kadyan made an additional cash investment of P 50,000 as per
OR No 952.
6 - Paid advertising to the Manila Times, P 8,064 VAT inclusive ( check no.
3516).
6 - Rica Parrel made a partial payment of P 10,000 as per OR No. 953.
6- Returned merchandise to Aklan Company, P 1, 120 VAT inclusive.
7 - Paid insurance premium to Malaya Insurance, P 10,080 VAT inclusive
(check no. 3517).
7 - Sold goods to Carnine Osias. P 21 ,000, VAT exclusive terms n/30 as per
Invoice No. 210.
8 - Sold merchandise to Lucy Ball, P 24,000 VAT ex.cJusive, terms I 0/IO, n/30
as per Invoice No. 211 .
9 - Alex Kady an withdrew P I 0,000 for his personal use (check no. 3518).
9 - Lucy Ball returned defective goods, P 4,000, VAT exclusive.
10 - Paid Abra Trading in full (check no. 3519). (see transactions dated Jan. I, 3, & 5).
JO - Paid Aldan Company in full (check no. 3S20). (see transactions dated Jan. 5 & 6).
IO . Bought computer from rBM, P 14,000, VAT inclusive tenns, n/30 as per
Invoice No. 22345.

224
Chaplcf 7 Spoaal JOUfflllt (lnlomal Conlrol for Caob)

Jan IO - Bought office supplies from Corona Bookstore. P 1,344 VAT terms n/30 as
per invoice no. 8778.
13 - Rica Parrel paid her account in full as per OR No. 954 (see transactions
Jan. J, 4, & 6).
14 - Cash purchases. P 5,000 VAT exclusive, as per invoice no 90089 (check
no. 3521).
15 - Received a cash refund for defective merchandise returned, P 500, VAT
exclusive as per OR No. 955.
15 - Paid the salaries of the employees, P 36,000.(check no. 3522).
16 - Bought gQOds from Albay, Ltd., P 9,520 VAT inclusive terms 2/5 n/30
as per invoice no. 44567.
16- Cash sales, P 12,500 VAT exclusive as per OR No. 956.(inv. no. 153)
17 - Issued check no. 3523 for P 448 to a customer who returned defective
merchandise.
17 - Sold goods top Ruben Pineda. P 4,000 VAT exclusive terms n/40 as per
invoice no. 212
18 - Sold goods to Erica.Datuin, P 40,000 VAT exclusive terms 2/10, n/30, with
trade discount of 10%-5% as per invoice no. 213 . ,
18 - Lucy Ball paid her account in full as per OR No. 957 (see transactions Jan. 8 & 9).
18 - Chona de Leon paid her promissory note together with the interest of P 24 as
per OR No. 958 (see transaction Jan. 2).
18 - Camille Osias paid her account in full as per OR No. 959 (see transaction Jan. 7).
19- Paid partially Albay Ltd., P 4,000 (check no. 3524).
20 - Sold goods to Rhodora Calvo, P 25,000 VAT exclusive, as per sales invoice
to. 214 terms 50% down and the balance, n/45 (OR No. 960). ·
20 - Paid freight charges to Fast Forwarders, P 2,240 VAT inclusive (check no.
3525) on the sale to Rhodora Calvo.
20 - Bought goods from Antique Enterprises, P 2,700 VAT exclusive, terms 2/ I0,
n/30 as per invoice no. 77665.
21 - Paid freight charges on the goods bought from Antique Enterprise to Fast
Forwarders, P 392 VAT inclusive (check no. 3526).
22 - Purchases on this date:
Agusan Traders - P 5,000, VAT exclusive, terms n/45 Inv. No. 8990
Albay, Ltd.- P 6,720, VAT inclusive, terms n/30 Inv. No.44600
23 - Paid the following expenses:
Meralco - Light & Water, P2,000, VAT exclusive (check no. 3527).
Wide Realty Corporation - Rent Expense, P 2b, 160, VAT inclusive
(check no. 3528)
Caltex Philippines - Gasoline & Oil, VAT inclusive P 17,920
(check no. 3529) ·
24 - Sales on this date:
Rica Parrel - P 3,000, VAT exclusive, terms n/60 Inv. No. 215
Rhodora Calvo - P I, 120 VAT inclusive, tenns COD as per OR No.961
sales invoice no. 154.
Ruben Pineda - JO-day promissory note, as per sales invoice no. 216
P 21,280, VAT inclusive.

225
°'""'"' 7 Spc,cial Journal• (ldcrnal Conltol for Cult)

Jan. 25 - Paid Antique Enterprises in full (check no. 3530). (see transaction dated Jan 20)
26 - Bought merchandise from Benguet Corporation, P 9,500, VAT exclusive
terms 10'/4 down, (check no. 353 I) balance n/30 as per invoice no. 7765.
28 - Sold merchandise to Alfonso Cusi, P 33,600, VAT inclusive, as per invoice
no. 216 terms 30-day note for P 11,200, and the balance n/30.
31 - Paid the note issued to Batangas Company in full together with the interest
of P 12 as per check no. 3532 (see transaction dated Jan. 1).
31 - The owner issued check to himself for P 25,000 for the tuition of bis
daughter (check DO. 3533).
31 - Expenses paid:
Salaries of the employees, P 32,000 (check no. 3534)
Calta Philippines-Gu & Oi~ P 24,000 VAT exclusive(check no.
3535).
Miscellaneous Expenses, (no VAT) P 3,460 (check no. 3536)
31 - Received rental from Lourdes Go, a tenant, P 6,000, VAT exclusive as
per OR No. 962.

REQUIRED:

I . Record the foregoing transactions in the appropriate journal

2. Double rule the total of the money columns in the special journals.
3. Post the accounts of the customers t~ the subsidiary ledger.
4. Post the actounts of the suppliers to the subsidiary ledger.
5. Pr~e the trial balance as of January 31 of the current year.
6. Prepare a schedule of Accounts Receiwlble.
7. Prepare a schedule of Accounts Payable.

226