lOMoARcPSD|20503808

Reviewer- Midterm ACCOUNTING EXERCISES IN

FINANCIAL AND ACCOUTING REPORTING
Bachelor of Science in Accountancy (Polytechnic University of the Philippines)

Studocu is not sponsored or endorsed by any college or university

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(1.1) On December 31, 2019, Jag Company had total assets of P 640,000 and total
liabilities of P180, 000. During 2020, the company had total revenues of P
560,000 and total expenses of P 460,000. Also during 2020, the owner withdrew
P 60,000. On December 31, 2020, total assets were P 840,000.

___ 460,000_______1. Compute the owner’s equity on December 31, 2019

ASSETS=LIABILITIES+ (CAPITAL+REVENUES-EXPENSE)
640,000= 180,000+ (360,000+560,000-460,000)

____100,000______ 2. Compute the net income for the year 2020.

(REVENUES-EXPENSES) (560,000-460,000=100,000)

____240,000______ 3. Compute the total liabilities on December 31, 2020.

(ASSETS-BEG ASSETS+NET INCOME- WITHDRAWAL) (840,000-
640,000+100,000-60,000)

____600,000______ 4. Compute the owner’s equity on December 31, 2020.

(ASSETS-LIABILITIES) (840,000-240,000)
(1-2) On March 1, 2020, Anthony Davis started his business, Davis Laundry Services,
by investing cash of P 140,000. During the month, he earned service revenue on
account, P 100,000. He also paid utilities expenses amounting to P 7,000; wages of P
20,000 and rent expense for the month of P 12,000. He later collected partially the
account of customers amounting to P 30,000. At the end of the month, he received a
bill for advertising for the month of March payable in April, amounting to P 10,000.

____191,000______ 5. Compute the owner’s equity on March 31, 2020

(140,000+ 100,000-7,000-20,000-12,000-10,000)
____201,000_____ 6. Compute the total assets on March 31, 2020
(140,000+ 100,000-7,000-20,000-12,000-30,000+30,000)
_________________ 7. Compute the total liabilities on March 31, 2020.
ASSET-OWENER’S EQUITY (201,000-191,000)
____61,000_______ 8. Compute the net income for the month of March 2020
REVENUES-EXPENSES (100,000-7,000-20,000-12,000=61,000)

(1-3) during the current year, the assets of Clipper’s Company increased by P
232,000 and the liabilities decreased by P 54,000. If the owner’s equity in the
business is P 620,000 at the end of the year, how much is the owner’s equity at the
beginning of the year?
ASSETS+232,000= (LIABILITIES-54,000)+(620,000-CAPITAL)
ASSET-LIABILITIES= 620,000-232,000-54,000= 334,000

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(1-4) the balance sheet of Miami Company shows owner’s equity of P 680,000, which
is equal to 2/3 of the amount of total assets. What is the amount of total assets? Total
liabilities?
680,000/2x3= 1,020,000 (ASSETS)
ASSETS=LIABILITIES+OE
1,020,000- 680,000= 340,000
(1-5) the following data relates to Warriors Company:
Withdrawals by the owner P 56,000
Total revenues during the year 308,000
Owner’s equity, January 1 220,000
Additional investments 94,000
Total expenses during the year 232,000

How much is the owner’s equity at the end of the year? 334,000
ANSWER WITH SOLUTION:
Owner’s Equity, January 1 220,000
Additional Investments 94,000
TOTAL:
=314,000
Total revenues during the year 308,000
Total expenses during the year 94,000
NET INCOME
=760,000

Withdrawals by the owner (56,000)

Owner’s Equity, End
=334,000

(1-6) given are the following selected data of Thunder Repair Service Company
Revenue from professional services rendered for cash P 490,000
Revenue from professional services rendered on account 160,000
Additional investment by the owner 104,000
Cash collected from account customers 230,000
Operating expenses incurred on account 48,000
Operating expenses incurred for cash 140,000
Cash withdrawn by the owner 76,000

Compute for the net income of the company.

ANSWER WITH SOLUTION
Revenue from professional services rendered for cash P 490,000
Revenue from professional services rendered on account 160,000
Operating expenses incurred on account (48,000)
Operating expenses incurred for cash (140,000)
TOTAL NET INCOME: 462,000
(1-7) you are given the following data:
December 31, 2019 December 31, 2020
Assets P 520,000 P 670,000
Liabilities? 300,000
During 2020: Net loss, Downloaded
P 20,000; Additional
by Fiel Marie investment, P 35,000; Drawings, P
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60,000
Compute for the beginning balance of liabilities.

ASSET-LIABILITIES+DRAWINGS-ADDITIONAL INVESTMENT+NET LOSS= OE,

DEC 31, 2020
670,000-300,000+60,000-35,000+20,000= 415,000
ASSET-BEG, OE= LIABILITIES
520,0000-415,000= 105,000

JERRY WEST, CPA

Trial Balance
December 31, 2020
Debit Credit
Cash 28,400
Accounts receivable 22,310
Supplies 30,000
Office equipment 50,000
Accounts payable
46,600
Jerry West, Capital
90,000
Jerry West, Drawing 8,000
Professional fees
42,660
Salaries expense 24,000
Advertising expense 9,100
Rent expense 4,000
Utilities expense 5,000
Miscellaneous expense 1,000
181,810 179,260

The following errors were detected:

1. Cash received from a customer on account was debited for P 4,700 and
Accounts Receivable was credited for the same amount. The actual collection
was for P 7,400.
2. The purchase of a computer on account for P 23,400 was recorded as a
debit to supplies for P 23,400 and a credit to Accounts payable for P 23,400.

3. Services were performed on account to a client for P 8,900. Accounts

receivable was debited for P 8,900 while Professional fees was credited for P
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4. A debit posting to Salaries expense of P 6,000 was omitted.

5. A payment on account for P 2,060 was credited to Cash for P 2,060 but
debited to Accounts payable for P 2,600.
6. The withdrawal of P 5,000 cash by the owner for his personal use was
debited Salaries expense.
7. Utilities expense of P 2,500 was posted as a credit rather than a debit.
8. The balance of Advertising expense is P 4,100 but it was listed as P 9,100
on the trial balance.
Required: Prepare a corrected trial balance.

JERRY WEST, CPA

Trial Balance
December 31, 2020
Debit Credit
Cash 31,100
Accounts receivable 19,610
Supplies 6,600
Office equipment 73,400
Accounts payable
47,140
Jerry West, Capital
90,000
Jerry West, Drawing 13,000
Professional fees
50,670
Salaries expense 25,000
Advertising expense 4,100
Rent expense 4,000
Utilities expense 10,000
Miscellaneous expense 1,000
187,810 187,810

(1-9) given the following

independent cases, answer the
1. On June 1, 2020, ABC Company collected a total of P 43,200 as payment in advance
of a one-year subscription contract to a monthly magazine from a client beginning
June 1, 2020. Give the entries needed to record (a) the receipt of the subscription
fees and (b) to adjust the accounts on December 31, 2020 using the liability method
and the revenue method.
LIABILITY METHOD REVENUE METHOD
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IJE IJE
Cash 43,200 Cash 43,200
Unearned Subscription Subscription Revenue 43,200
43,200 AJE
AJE Subscription Revenue 18,000
Unearned Subscription 25,200 Unearned Revenue 18,000
Subscription Revenue
SOLUTION
25,200
43,200-25,200= 18,000
43,200/12x5(months unused) =18,000
SOLUTION
43,200 = 3,600x7(months) = 25,200
12

2. Sincere Company incurs salaries at the rate of P 12,600 per day. It pays the employees
every Saturday for a 6 day work-week. The last payday was January 27. Give the adjusting
entry on January 31.
Salaries Expense 37,800
Salaries Payable 37,800
12,600x3= 37,800

3. Gonzales and Mendoza, a law firm, performed legal services in late December, 2020 for
clients. The P 42,000 of the services will be billed to the clients in January, 2021. Give the
adjusting entry that is necessary on December 31, 2020 if the financial statements are
prepared at the end of each month.
Account Receivable 42,000
Service Revenue 42,000

4. Assume that a company acquires a building on January 1, 2020 at a cost of P 1,410,000.

The building has an estimated useful life of 25 years and an estimated residual value of P
150,000. What adjusting entry is needed on December 31, 2020 to record the
depreciation for the entire year?
ANSWER & SOLUTION:
JAN 1, 2020
LAND 1,410,000
CASH 1,410,000
DEC 31, 2020
LAND 50,400
ACCUMULATED DEPRECIATION 50,400
SOLUTION
1,410,000-150,000 = 50,400
2

5. Give the adjusting entries needed as of December 31, the last day of the current year.
Show your computations after each entry.

(a) The balance of the supplies account is a debit of P 14,125. The inventory of supplies on
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December 31 amounts to P 4,220.

ASSET METHOD
OJE
Office Supplies 14,125
Cash 14,125
AJE
Supplies Expense 9,905
Office Supplies 9,905
14,125-4,220= 9,905

b) The insurance expense account has a debit balance of P 46,800 which represent a one-
year insurance premium paid in advance on October 1.

ASSET METHOD EXPENSE METHOD

IJE IJE
Prepaid Insurance 46,800 Insurance expense 46,800
Cash 46,800 Cash 46,800
AJE AJE
Insurance Expense 11,700 Prepaid Insurance 35,100
Prepaid Insurance 11,700 Insurance expense 35,100
SOLUTION: 46,800 x 3 months= 11,700 SOLUTION: 46,800-11,700= 35,100
12 46,800/12x9= 35,100

(c) The balance of the prepaid rent account is a debit of P 27,000 which represent a 6-
month rent received in advance on October 15.

ASSET METHOD EXPENSE METHOD

IJE IJE
Prepaid Rent 27,000 Rent expense 27,000
Cash 27,000 Cash 27,000
AJE AJE
Rent Expense 11,250 Prepaid expense 15,750
Prepaid Rent 11,250 Rent expense
SOLUTION: 15,750
27,000 = 4,500 x 2.5 (months) = SOLUTION:
11,250 27,000-11,250= 15, 750
6

(d) The taxes expense account includes a debit of P 64,800 which represent an advance
payment of taxes for one year beginning April 30.

EXPENSE METHOD
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Tax expense 64,800

Cash 64,800
AJE
Prepaid tax 21,600
Tax expense 21,600
SOLUTION
64,800-43,200= 21, 600
64,000/12x4=21,600

(e) The advertising expense account includes a debit of P 111,072 which represent the
cost of an advertising contract to publish the company ad in 52 consecutive issues of
weekly magazine. As of December 31, advertisements had appeared in 32 issues already.

(f) The balance of the equipment account is a debit of P 235,200 which represent the cost
of office equipment purchased at the beginning of the year. This equipment was estimated
to have a life of 15 years with a residual value of P 9,600.
SOLUTION & ANSWER
235,200-9,600 = 15,040
15

(g) An automobile was acquired on July 1 at a cost of P 720,000. This automobile was
estimated to have a life of 8 years with a residual value of P 90,000.
SOLUTION & ANSWER:
720,000-90,000 = 78,750
8 (Useful life)
78,750= 17,750
12
17,750x6(USED) = 39,375

6. Give the adjusting entries needed as of December 31, the end of the current fiscal year.
Show your computations after each entry.

(a) The rent revenue account showed a credit balance of P 48,000 which represent a 6
month rent received in advance from a tenant on October 31.
REVENUE METHOD
IJE
Cash 48,000
Rent Revenue 48,000
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Rent Revenue 32,000

Unearned Rent 32,000
SOLUTION:
48,000-16,000= 32,000
48,000/6x4= 32,000

(b) The balance of the unearned commissions account is a credit of P 35,100 which
represent commissions received in advance for selling one dozen computer sets. As of
December 31, only 5 computer sets were sold.
LIABILITY METHOD
IJE
Cash 35,100
Unearned Commission 35,100
ADJ
Unearned Commission 14,625
Commission Revenue 14,625
SOLUTION:
35,000 = 2,925 x 5= 14,624
12

(c) Service fees of P 264,000 were collected for one year in advance on April 1. These are
credited to Unearned Service Fees when received.
LIABILITY METHOD
IJE
Cash 264,000
Unearned Service Fee 264,000
ADJ
Unearned Service Fee 198,000
Service Fee 198,000
SOLUTION:
264,000 = 22,000 x 9= 198,000
12

(d) Subscriptions income has a credit balance of P 14,040 which represent a one-year
subscription to a monthly magazine received in advance on May 31.
REVENUE METHOD
IJE
Cash 14,040
Subscription Revenue 14,040
AJE
Subscription Revenue 5,850
Unearned Subscription 5,850
SOLUTION:
14,040-8,190= 5,850
14,040/12x5=5,850
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(e) The company pays a total of P 90,000 every Friday for a 5-day work week ending
Friday. Assume that the last day of the year falls on a Wednesday.
Wages Expense 54,000
Wages Payable 54,000
SOLUTION: 90,000/5x3= 54,000

(f) The company had rendered services to a client towards the end of December. The bill
for P 14,100 will be sent in January of the following year.
Account Receivable 14,100
Service Revenue 14,100

1-10 prepare the adjusting entries on December 31, 2020, the end of the annual
accounting period, on the following independent data. Show your computations after each
entry.

1. The Insurance Expense account had a debit balance on December 31, 2020 of P 72,000
representing premium for a 2-year fire insurance policy effective October 1, 2020.
EXPENSE METHOD
IJE
Insurance Expense 72,000
Cash 72,000
AJI
Insurance Revenue 63,000
Unearned Insurance 63,000
SOLUTION:
72,000-9,000= 63,000
72,000/24x21= 63,000

2. Rent Income was credited for P 58,500 on November 1, 2020 representing 9 months’
rent collected in advance.
REVENUE METHOD
IJE
Cash 58,500
Rent Income 58,500
AJI
Rent Income 45,500
Unearned Rent 45,500
SOLUTION:
58,500-13,000=45,500
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58,500/9x7=45,500

3. Machinery per general ledger on December 31, 2020 shows a balance of P 558,000.
Machinery acquired during the year was P 78,000 on March 1, 2020. All machinery is to be
depreciated at the rate of 25% per annum.
Machinery, beg balance (558,000-78,000)= 48,000
x.25
+(78,000(.25)(10/12)= 16,250
=136,250

4. As of December 31, 2020, commissions already earned but not yet collected amounted
to P 18,000.
Account Receivable 18,000
Commissions 18,000

5. Supplies costing P 18,000 bought during the period was debited to the Supplies
account. Of the amount, P 8,000 were consumed during the year.
Supplies Expense 8,000
Supplies 8,000

6. Unearned Subscriptions account showed a credit balance of P 76,000 per general ledger
on December 31. Of this, 40% had been actually earned during the period.
Unearned Subscription 30,400
Subscription Income 30,400
SOLUTION:
76,000x0.4= 30,400

7. On December 31, 2020 a 60-day, 9% Notes Payable has a balance of P 360,000 per
general ledger. The note was issued on December 5, 2020. No interest has been taken on
this note.
Interest Expense 2,340
Interest Payable 2,340
SOLUTION
360,000x(.09)(26/360)= 2,340
8. Fees Collected in Advance has a balance of P 600,000 of which 60% has been earned
Unearned Fees 360,000
Fees Earned 360,000
SOLUTION: 600,000x0.6= 360,000

9. Notes Receivable has a balance of P 300,000 received from a customer in settlement of

an open account on November 16, by
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Fiel Marie note
Satera is a 90-day, 12% note. No interest has
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been taken on this note

Interest Receivable 4,500
Interest Income 4,500
SOLUTION: 300,000(.12)(45/360)= 4,500

10. The Prepaid Insurance account has balance of P 105,000 on December 31, 2020. The
balance represented two fire insurance policies acquired during 2020. The first policy,
Policy I for P 60,000 was acquired on March 1, 2020 and the second policy, Policy II was
acquired on August 1, 2020 for P 45,000. Policy I is payment for a 2-year plan while Policy
II is for a one-year plan.
Insurance Expense 43,750
Prepaid Insurance 43,750
SOLUTION: 600,000 (10/24) + (5/12)= 43,750
(I-11.) Compute for the missing items as indicated by a letter below.
SALES BEGINNIN NET ENDING COGS GROSS OPERATIN NET
G PURCHASE INVENTO PROFI G INCOM
INVENTOR S RY T EXPENSE E
Y
175,00 A. 85,000 60,000 B. 90,000 C. 62,000
0 60,000 85,000 28,000
D. 62,000 E. 68,000 158,000 110,00 40,000 70,000
0
280,00 72,000 217,000 F. G. 100,00 H. (51,00
0 109,000 180,000 0 0)
440,00 90,000 I. 110,000 J. K. 170,000 90,000
0

A. 60,000 (COGS- ENDING INV-PURCHASES) (85,000+ 60,000-85,000)

B. 85,000 (NET SALES- GROSS PROFIT) (175,000-90,000)

C. 28,000 (GROSS PROFIT- NET INCOME) (90,000-62,000)

D. 268,000 (COGS+GROSS PROFIT) (158,000+110,000)

E. 164,000 (COGS+END INV-BEG INV) (158,000+68,000-62,000)

F. 109,000 (BEG INV+ NET PURCHASES- COGS- END INV)

(72,000+217,000-180,000)

G. 180,000 (NET SALES- GROSS PROFT) (280,000-110,000)

H. 151,000 (GROSS PROFIT+ NET INCOME) (100,000+51,000)

I. 200,000 (COGS+END INV- NET INCOME) (180,000+110,000-90,000)

J. 180,000 (NET SALES- GROSS PROFIT) (440,000-260,000)

K. 260,000 (OPERATING EXPENSE+ NET INCOME) (170,000+90,000)

1-12. given the following data, solve for the following:

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Debit Credit
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Sales P 425,000

Sales returns and allowances P 14,000

Accounts receivable 43,000

Allowance for bad debts 760

1. If the estimate uncollectible is made by taking 10% of outstanding

accounts receivable, the amount of adjustment is 3,540
Doubtful Accounts Expense 3,540
Allowance for doubtful expense
3,540
SOLUTION & ANSWER:
43,000x 10%= 4,300
4,300-760= 3,540

2. The following accounts were abstracted from Lakers Co.’s unadjusted trial
balance at December 31, 2020.

Debit
Credit

Accounts receivable P 700,000

Allowance for bad debts 8,000

Net credit sales P 3,000,000

Lakers estimates that 1% of the gross account receivable will become

uncollectible. After adjustment at December 31, 2020, the Allowance for
Bad Debts should have a credit balance of ___15,000____
SOLUTION & ANSWER:
Bad debt Expense 15,000
Allowance for bad debts 15,000
700,000x1%= 7,000+8,000=15,000

(1-13). the following accounts were found in the ledger of Blondie Company
on December 31, 2020:

Debit Credit

Accounts receivable P 356,800

Allowance for bad debts 8,760

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Cash Sales P
913,800

Credit Sales
1,851,000

Instructions:

1.) Prepare the adjusting entry to take up the provision for bad debts
account on the books of Blondie Company under each of the following
independent assumptions:

a) Analysis indicates that 5% of the outstanding accounts receivable will

not be collected.
SOLUTION & ANSWER:
Bad debt expense 26,600
Allowance for bad debts 26,600
356,800x5%= 17,840 + 8,760= 26,600

b) Accounts receivable of P 40,000 will become uncollectible.

SOLUTION & ANSWER
Bad debt Account Expense 48,760
Account Receivable 48,760
40,000+8,760= 48,760

c) Accounts receivable of P 10,000 is to be written off, and that the

allowance for bad debts is to be adjusted to 10% of the outstanding
accounts receivable.
SOLUTION & ANSWER
356,800x.1 + 18,760= 53,440

2. Show how the Accounts Receivable and the Allowance for Bad Debts
would appear on the December 31, 2020 Statement of Financial
Position.
SOLUTION & ANSWER

1. At the beginning of the period, Kevin Company has Inventory of P40, 000. During
the year, Kevin Company purchased P100, 000 of merchandise on credit terms of
3/10, n/30. Defective merchandise of P3, 000 was returned to supplier. Kevin
Company takes all purchase discounts. At the end of the period a physical inventory
revealed P15, 000 of merchandise onMarie
Downloaded by Fiel hand. Freight in showed a balance of P 5,000.
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How much is the cost of goods available for sale for the period? (Ignore VAT)
SOLUTION & ANSWER:
Beg Inventory + (Purchases – returned x discount) + Freight in
40,000 + 94,090 (100,000-3,000 & 97,000x3%) + 5,000 = 139,090

MERCHANDISING AND VAT

2. Paco Company had the following data for the period just ended. Sales return and
allowances, P26, 750; Cash Sales, P320, 000; Credit Sales is 80% of cash sales;
Freight out, P10,400; Sales discount, P20,300. How much would be the amount of
gross sales that must be shown in the income statement?
SOLUTION & ANSWER:
320,000x80%= 256,000 320,000+256,000= 576,000

3. Gross profit of Prada Company for the year 2020 is P45, 000 which is 18% of net
sales. Sales returns and allowances amounted to P40, 275 and sales discount is 2% of
net sales. How much would be the cost of goods sold for the year 2020?
SOLUTION & ANSWER:

4. Data for Gucci Company: Beginning inventory, P180, 000; Net purchases is 120% of
beginning inventory; Ending inventory is 40% of net purchases. How much is the
amount of the Ending Inventory?
SOLUTION & ANSWER:
180,000 x 120% = 216,000 216,000 x 40% = 86,400

5. Using data in number 4, how much is the cost of goods sold? *

SOLUTION & ANSWER:
Beg Inventory + Net Purchases – Ending Inventory = COGS
180,000 + 216,000 - 86,400= 309,600

6. Marc Company sold merchandise to Jacobs Company on July 7, 2020 at a list price
of P150, 000, trade discounts of 8% and 5%, FOB shipping point. Cash discount terms:
2/elm, n/60. Because defective merchandise with an invoice price of P7, 000 was
erroneously delivered, Marc Company
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by Fiel Marie a credit memorandum to the buyer on
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July 9, 2020. Jacobs Company paid in full the balance due on July 29, 2020. The
invoice price of goods sold on July 7, 2020 is_______. (Ignore VAT)
SOLUTION & ANSWER:
List Price x Trade Discounts
150,000x92%x95%= 131,100

7. The following information were taken from the books of YSL Company for the year
2020: Sales P530, 000; Cost of goods sold is 65% of Sales; Selling expenses P114,000;
General and administrative expenses P53,200; Interest income P80,000; Interest
expense P36,000. How much is the net income
SOLUTION & ANSWER:
Net Sales-Cogs = Gross Profit
Gross Profit-Expenses = Net Income
530,000-185,000= 344,500 (GROSS PROFIT)
530,000 x 35%
344,500 - 114,000 - 53,200 - 80,000 - 36,000= 61,300

8. On April 5, 2020, Clippers Company purchased merchandise with a list price of P

125,000. The merchandise is subject to a trade discount of 5%, 7% and with credit
terms of 2/10; n/30. How much is the amount to be debited to Purchases?
SOLUTION & ANSWER:
List Price – Trade Discount = Invoice Price
125,000x95%x93%= 110,437.50

9. Using data in no. 8, how much is the 5% trade discount?

SOLUTION & ANSWER:
125,000x5% = 6,250

10. Using data in no. 8, how much is the 7% trade discount?

SOLUTION & ANSWER:
(125,000-6,250) 118,750x7% = 8,312.50

11. If Clippers make payment on April 12, how much is the cash discount?
SOLUTION & ANSWER:
110,437.50 x 2% = 2,208.75

12. If Clippers make payment on April 25, how much is the amount due? *
SOLUTION & ANSWER:
110,437.50 (NO CASH DISCOUNT)

13. If Clippers make payment on April 25. Isabel’s RTW regularly buys merchandise
from a wholesale outlet and is allowed trade discounts of 25% and 15%. Isabel made
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a purchase and received an invoice with a list price of P 900,000 and a freight cost of
P 50,000, FOB destination, freight collect, and payment terms of n/30. How much is
the amount due from Isabel?
SOLUTION & ANSWER:
900,000 x 75% x 85% = 573,000 – 50,000 = 523,750

14. AA Company sold merchandise to BB Company on March 7, 2020 at a list price of

P150, 000, trade discounts of 5% and 8%, FOB shipping point. Cash discount terms:
2/eom, n/60. Because defective merchandise with an invoice price of P10, 000 was
erroneously delivered, AA Company issued a credit memorandum to the buyer on
March 11, 2020. BB Company paid in full the balance due on March 25, 2020. How
much is the invoice price subject to cash discount? (IGNORE VAT)
SOLUTION & ANSWER:
150,000 x 95% x 92% = 131,100

15. Compute for the company's purchase returns and allowances given the following:
Cost of Goods sold P9,000; Beginning Inventory P6,000; Ending inventory P10,000 and
Gross Purchases P14,500.
SOLUTION & ANSWER:
14,500+6,000-10,000 = 10,500- 9,000 = 1,500

16. Sam Company started its business operation on January 1, 2020. The company's
trial balance as of January 31, 2020 included the following: Purchases P60,000;
Purchase returns and allowances P3,000; Freight in P4,500; Freight out P5,000; Ending
inventory P12,000. Compute the Cost of Goods Sold.
SOLUTION & ANSWER:
60,000 – 3,000 + 4,500 – 12,000 = 43,500

17. Chanel Company, sold merchandise to Dior Company on October 7, 2020 at a list
price of P150,000, trade discounts of 8% and 5%, FOB shipping point. Cash discount
terms: 2/eom, n/60. Because defective merchandise with an invoice price of P10,000
(VAT exclusive) was erroneously delivered, Chanel Company issued a credit
memorandum to the buyer on October 11, 2020. Dior Company paid in full the
balance due on October 25, 2020. Both companies are using the periodic inventory
method and are VAT registered. The invoice price (VAT inclusive) of goods purchased
on October 7, 2020 is
SOLUTION & ANSWER:
150,00 x 92% x 95% = 131,100

18. Using data in no. 17, how much is the input VAT of Dior Company that will be
recorded on the date of purchase?
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SOLUTION & ANSWER:

131,100 / 1.12 x 12%= 14,046.43

19. If Dior Company paid the amount due within the discount period, how much is the
cash discount exclusive of VAT?
SOLUTION & ANSWER:
131,100-10,000-14,046,43= 2,141.07

20. If Chanel Company collected the amount due after the discount period, how much
will be credited to Accounts Receivable?
SOLUTION & ANSWER:
131,100-11,200 = 119,900
Since vat exclusive yung 10k na defective kailangan mo siya I multiply sa
12%, so 10k+1.2k= 11,200

ANOTHER REVIEWER

1. Jose Company sold merchandise to Pedro Company on August 1, 2020 at a list price
of P80, 000. Trade discounts of 10% and 5% were offered to Pedro. Cash discount
terms were 3/eom, n/45, FOB shipping point (transportation is shouldered by the
buyer ). Jose Co. paid the freight on August 3, 2020 amounting to P5,000. Jose
company issued a credit memo to Pedro Co. for P2,000 (invoice price) for defective
merchandise returned on August 5, 2020. Pedro Company paid the amount due on
August 30, 2020. Both companies are using the periodic inventory method and are
non vat registered business. ( 3/eom means 3% cash discount if paid until the end of
the month) How much is the invoice price?

SOLUTION & ANSWER:

80,000 x 90% x 95% = 68,400

2. Using information given in no. 1, how much is the first trade discount? *
SOLUTION & ANSWER:
80,000 x 10% = 8,000

3. Using information given in no. 1, how much is the second trade discount? *
SOLUTION & ANSWER:
72,000 x 5% = 3,600

4. Using information in no.Downloaded

1 at what by Fielamount
Marie Satera should Jose Company credit Sales?
([email protected])
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SOLUTION & ANSWER:

80,000 x 90% x 95% = 68,400

5. Using information in no. 1, how much is the cash discount? *

SOLUTION & ANSWER:
Trade Discounts = 10% and 5%
80,000 x 90% = 72,000
72,000 x 95% = 68,400

Defective Merchandise returned

68,400-2,000= 64,400

66,400 x 3% = 1,992

6. Using information in no. 1. If payment is paid on August 23, 2020, how much will be
the amount collected by Jose Company?
SOLUTION & ANSWER:
List Price = 80,000

Trade Discounts = 10% and 5%

80,000 x 90% = 72,000
72,000 x 95% = 68,400

Defective Merchandise returned

68,400-2,000= 64,400

Cash Discount = 3%
66,400 x 97% = 64, 408

Freight Cost = 5,000

64,408 + 5,000 = 69, 408

2. Using information given in no. 1, how 7. Using information in no. 1, if payment is

paid on September 2, 2020, how much will be the amount paid by Pedro Company? is
the first trade discount?
SOLUTION & ANSWER:
List Price = 80,000
Trade Discounts = 10% and 5%
80,000 x 90% = 72,000
72,000 x 95% = 68,400

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8. On March 15, 2020, Star Company bought merchandise from Sun Company
amounting to P50,000 (VAT exclusive). Terms 2/10, n/30. FOB destination, freight
prepaid (Transportation cost shouldered by the seller, freight prepaid means
transportation is paid by seller). Freight cost amounted to P1,000. How much is the
amount of Accounts Payable to be recorded on the date of purchase? Both companies
are using the periodic inventory method and are VAT registered business.
SOLUTION & ANSWER:
50,000 (VAT EXCLUSIVE)
50,000 x 12% VAT = 6,000
50,000 + 6,000 = 56,000

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