TRADE AND CASH DISCOUNTS

Problem1: On June 1, 2015, ABC Co. sold merchandise with a P180,000 list price.

Trade Discount Credit Terms Date paid

A. 40% 2/10, n/30 June 8
B. 30% 1/10, n/30 June 15
C. - 2/10, n/30 June 11
D. 20% 1/15, n/30 June 14
E. 40% n/30 June 28

Required:

For each of the sales terms, determine the following:

1. the amount recorded as sale

2. the amount of cash received

Problem2: XYZ Co. engaged in the following purchase transactions during the month. The entity
observes the policy that all returns are made one day after the goods are received, and that all
purchases are paid within the discount period.

List Price FOB Terms Freight Purchase Credit Terms Trade

Charges Returns and Discount
Allowances
P114,000 Shipping Pt. P4,000 P21,000 2/10, n/30 30%
116,000 Destination 9,000 - 1/10, n/30 20%
86,000 Shipping Pt. 2,000 7,000 2/10, n/30 -
32,000 Shipping Pt. 1,000 9,000 n/30 25%
237,000 Destination 14,000 24,000 3/10, n30 20%

Required:

Using the table above, calculate the amount needed to settle each purchase.

ADJUSTING ENTRIES

Problem3:

Prepare the necessary adjusting entry/entries for each of the following independent cases.

a) Wally Trading pays salaries of P7,500 every Saturday for a six-day week. The
accounting period ends on December 31, which falls on a Thursday.
b) The supplies account of Cannon Co. showed a balance of P8,090. A physical count at
the end of the accounting period determined that actual supplies on hand amounted to
P2,761.
c) Union commercial bought a truck on March 1, 2015 costing P432,000. The truck is
estimated to have a useful life of 6 years without a salvage value. The accounting period
ends on December 31, 2015
 d) GEM Co. paid P32,400 to UNIQUE Co. on May 31, 2015 for a one year advertising
campaign to start immediately. GEM’s accounting period ends on April 30 while UNIQUE
ends on November 30.
1) Prepare the adjusting entries on the books of GEM using:
1.a Asset Method
1.b Expense Method

2) Prepare adjusting entries on the books of UNIQUE using:

2.a Liability method

2.b income method

e) On Nov. 1, Unearned rent was credited for P135,000 representing rental for nine months
beginning on that date. The accounting period ends of December 31.

f) Unpaid salaries at the end of the accounting period amounted to 15,000

g) Accounts Receivable balance on December 31 (end of accounting period) is P1,500,000.

Of this amount, P7,500 are estimated to be uncollectible.

CORRECTING ENTRY

Problem4: Prepare a correcting entry for each of the following accounting errors (No need to
write an explanation)

1. Debited Supplies and credited Accounts Payable for a P29,000 purchase of equipment
on account.
2. Adjusted Prepaid rent by debiting Prepaid Rent and crediting Rent Expense for P9,000.
This adjusting entry should have debited Rent expense and credited Prepaid Rent for
P9,000.
3. Debited Salary Expense and credited cash to accrue salary expense of P9,000.
4. Recorded the earning of P32,000 service revenue collected in advance by debiting
Accounts Receivable and crediting Service Revenue
5. Accrued interest revenue of P8,000 by a debit to accounts receivable and a credit to
Interest revenue
6. Recorded a P6,000 cash purchase of supplies by debiting supplies and crediting
Accounts payable.