JOURNAL ENTRIES FOR MERCHANDISING BUSINESS

Problem 1
Some of the transactions of Leonila Company whose credit terms are 2/10, n/30 follow:
June 1 Cash sales, P180,000
4 Sales on account, P650,000.
7 Received returned merchandise sold on account, P90,000.
10 Collected the amount due on credit sales.

June 1 Cash 180,000

Sales 180,000
4 Accounts Receivables 650,000
Sales 650,000
7 Sales Returns and Allowances 90,000
Accounts Receivables 90,000
10 Cash 548,800
Sales Discounts 11,200
Accounts Receivables 560,000

Problem 2
Several purchase transactions of the Icaro Company are presented below. The credit terms of
the company are 3/10, n/30.
Oct 6 Purchased merchandise for cash, P200,000; FOB shipping point.
12 Purchased merchandise on account, P700,000.
15 Returned merchandise purchased on account, P50,000.
17 Paid supplier the amount due.
19 Paid freight charges of P7,000 on merchandise acquired last Oct. 6.

Oct 6 Purchases 200,000

Cash 200,000
 12 Purchases 700,000
Accounts Payable 700,000
15 Accounts Payable 50,000
Purchases Returns and Allowances 50,000
17 Accounts Payable 650,000
Cash 630,500
Purchases Discounts 19,500
19 Cash 7,000
Freight-in 7,000

Problem 3
On June 16, Ilano Co. sold merchandise to Pascual Co. for P6,000, terms 2/10, n/30. Shipping
costs were P600. Pascual Co. received the goods and Ilano Co. invoice on June 17. On June
24, Pascual Co. sent the payment to Ilano Co., which Ilano Co. received on June 25. Both Ilano
Co. and Pascual Co. use the periodic inventory system. The following are several arrangements
regarding the shipping costs:
a. Shipping terms are FOB shipping point, freight collect. Pascual Co. paid the
shipping costs on June 17 and remitted P5,880 on June 24.
Required:
1. Prepare the entries for Ilano Co. to record the sale and cash receipt.
2. Prepare the entries for Pascual Co. to record the purchase, the payment of shipping
costs, and the cash remittance.

June 16 Accounts Receivables 6,000

Sales 6,000
24 Cash 5,880
Sales Discount 120
Accounts Receivables 6,000
b. Shipping terms are FOB destination, freight prepaid. Ilano Co. paid the shipping
costs on June 16. Pascual Co. remitted P5,880 on June 24.
Required:
1. Prepare the entries for Ilano Co. to record the sale, the payment of shipping costs, and
the cash receipt.
2. Prepare the entries for Pascual Co. to record the purchase and cash remittance.

June 16 Accounts Receivable 6,000

Sales 6,000
 Freight-out 600
Cash 600

24 Cash 5,880
Sales Discount 120
Account Receivables 6,000

c. Shipping terms are FOB shipping point, freight prepaid. Ilano Co. paid the
shipping costs on June 16 and added the P600 cost to the invoice sent to Pascual
Co. Pascua Co. remitted P6,480 on June 24.
Required:
1. Prepare the entries for Ilano Co. to record the sale and freight payment, and the cash
receipt.
2. Prepare the entries for Pascual Co. to record the purchase and the cash remittance.

June 16 Accounts Receivables 6,000

Sales 6,000

Accounts Receivables 600

Cash 600

24 Cash 6,480
Sales Discount 120
Accounts Receivables 6,600

d. Shipping terms are FOB destination, freight collect. Pascual Co. paid the shipping
costs on June 17 and deducted the P600 from the amount owed to Ilano Co. A
copy of the freight bill to Ilano Co. was provided with the June 24 cash remittance.
Pascual Co. remitted P5,280 on June 24.
Required:
1. Prepare the entries for Ilano Co. to record the sale and cash receipt.
2. Prepare the entries for Pacual Co. to record the purchase, the freight payment, and the
remittance.

June 16 Accounts Receivables 6,000

Sales 6,000

Freight-out 600
Accounts Receivable 600

24 Cash 5,280
Sales Discount 120
Accounts Receivables 5,400
Problem 4
Armando Company entered into the following transactions during the month of June:
June 2 Purchased 1,000 tires at a cost of P600 per tire, 1/10, n/45.
4 Paid trucking firm P 8,000 to ship the tires purchased on June 2.
5 Purchased 600 tires at a cost of P600 per tire, 2/10, n/30.
6 Paid trucking firm P5,000 to ship the tires purchased on June 5.
7 Returned 150 of the tires purchased on June 2 because they were defective.
Received a credit on open account from seller.
11 Paid tires purchased on June 2.
13 Sold 700 tires from those purchased on June 2. The selling price was P900 per
tire, 1/10, n/30.
22 Received cash from sale of tires on June 13.
30 Paid for tires purchased on June 5.

June 2 Purchases 600,000

Accounts Payable 600,000
4 Freight-in 8,000
Cash 8,000
5 Purchases 120,000
Accounts Payable 120,000
6 Freight-in 5,000
Cash 5,000
7 Accounts Payable 90,000
Purchases Returns and Allowances 90,000
11 Accounts Payable 510,000
Cash 504,900
Purchases discounts 5,100
13 Accounts Receivable 630,000
Sales 630,000
 22 Cash 623,700
Sales Discount 6,300
Sales 630,000
30 Accounts Payable 120,000
Cash 120,000

Problem 5
Virginia engaged in the following transactions in August:
Aug 1 Sold merchandise to Lacierda on credit, n/30, FOB shipping point, P21,000.
3 Purchased merchandise on credit from Cabellon n/30, FOB shipping point,
P38,000.
5 Paid Southmin for freight charges on merchandise received, P290.
6 Purchased store supplies on credit from Ipil, n/20, P6,360.
8 Purchased merchandise on credit from Pagadian Company n/30, FOB shipping
point, P36,000. Pagadian Company paid P200 for freight.
12 Returned some of the merchandise received on Aug 3 for credit, P6,000.
15 Sold merchandise on credit to Columban Stores, n/30, FOB shipping point,
P12,000.
16 Returned some of the store supplies purchased on Aug 6 for credit, P2,000.
17 Sold merchandise for cash, P10,000.
18 Accepted for full credit a return from Lacierda, P2,000.
24 Paid accounts to Cabellon.
25 Received full payment from Lacierda.

Aug 1 Accounts Receivable 21,000

Sales 21,000
3 Purchases 38,000
Accounts Payable 38,000
5 Freight-in 290
 Cash 290
6 Supplies 6,360
Accounts Payable 6,360
8 Purchases 36,000
Accounts Payable 36,000
12 Accounts Payable 6,000
Purchases Returns and Allowances 6,000
15 Accounts Receivable 12,000
Sales 12,000
16 Accounts Payable 2,000
Supplies 2,000
17 Cash 10,000
Sales 10,000
18 Sales Returns and Allowances 2,000
Accounts Receivables 2,000
24 Accounts Payable 32,000
Cash 32,000
25 Cash 19,000
Accounts Receivable 19,000

Problem 6

Montrose Company completed the following transactions during May of the current year.
Montrose Company uses a perpetual inventory system.

M   3   Purchased merchandise on account from Floyd Co., P4,000, terms FOB

ay   .   shipping point, 2/10, n/30, with prepaid transportation costs of P120 added to
    the invoice.
    5   Purchased merchandise on account from Kramer Co., P8,500, terms FOB
  .   destination, 1/10, n/30.
   
    6   Sold merchandise on account to C. F. Howell Co., list price P4,000, trade
  .   discount 30%, terms 2/10, n/30. The cost of the merchandise sold was P1,125.
   
    8   Purchased office supplies for cash, P150.
   .  
   
    1   Returned merchandise purchased on May 5 from Kramer Co., P1,300.
  0  
  .  
    1   Paid Floyd Co. on account for purchase of May 3, less discount.
  3  
  .  
    1   Purchased merchandise for cash, P10,500.
  4  
  .  
    1   Paid Kramer Co. on account for purchase of May 5, less return of May 10 and
  5   discount.
  .  
    1   Received cash on account from sale of May 6 to C. F. Howell Co., less
  6   discount.
  .  
    1   Sold merchandise on nonbank credit cards and reported accounts to the card
  9   company, American Express, P2,450. The cost of the merchandise sold was
  .   P980.
    2   Sold merchandise on account to Comer Co., P3,480, terms 2/10, n/30. The cost
  2   of the merchandise sold was P1,400.
  .  
    2   Sold merchandise for cash, P4,350. The cost of the merchandise sold was
  4   P1,750.
  .  
    2   Received merchandise returned by Comer Co. from sale on May 22, P1,480.
  5   The cost of the returned merchandise was P600.
  .  
    3   Received cash from card company for nonbank credit card sales of May 19,
  1   less P140 service fee.
  .  

May 3 Inventory 4,000

Accounts Payable 4,000
5 Inventory 8,500
Accounts Payable 8,500
6 Accounts Receivable 2,800
Sales 2,800
Cost of Goods Sold 1,125
Inventory 1,125
8 Office Supplies 150
Cash 150
10 Accounts Payable 1,300
Inventory 1,300
13 Accounts Payable 4000
Cash 3920
Purchases Discount 80
14 Inventory 10,500
Cash 10,500
15 Accounts Payable 7.200
Cash 7128
Purchases Discount 72

16 Cash 2744
Sales Discount 56
Accounts Receivable 2,800
19 Accounts Receivable 2,450
Sales 2,450
Cost of Goods Sold 980
Inventory 980
22 Accounts Receivable 3,480
Sales 3,480
Cost of Goods Sold 1,400
Inventory 1,400
24 Cash 4,350
Sales 4,350
Cost of Goods Sold 1,750
Inventory 1,750
25 Sales Returns and Allowances 1,480
Accounts Receivable 1,480
Inventory 600
 Cost of Goods Sold 600
31 Cash 2,310
Accounts Receivable 2,310

Problem 7
Marichu engaged in the following transactions in December:
Dec 7 Sold merchandise on credit to Caindec Company, n/30, FOB shipping point,
P30,000.
8 Purchased merchandise on credit from Kho Company, n/30, FOB shipping point,
P60,000.
9 Paid Dinopol Company for shipping charges on merchandise purchased on Dec
8, P254.
10 Purchased merchandise on credit from Magallanes Company, n/30, FOB
shipping point, P95,400. Freight costs of P600 was paid by Magallanes.
13 Purchased office supplies on credit from Carlos Company, n/10, P24,000.
14 Sold merchandise on credit to Zosa Company, n/30, FOB shipping point,
P24,000.
14 Returned damaged merchandise received from Kho Company on Dec 8 for
credit, P6,000.
17 Received check from Caindec Company for his purchase on Dec 7.
18 Returned portions of the office supplies received on Dec 13 for credit because
the wrong items were sent, P4,000.
19 Sold merchandise for cash, P18,000.
20 Paid Magallanes Company for purchase on Dec 10.
21 Paid Kho Company.
24 Accepted from Zosa Company a return of merchandise, P2,000.

Dec 7 Accounts Receivable 30,000

Sales 30,000
8 Purchases 60,000
Accounts Payable 60,000
9 Freight-in 254
 Cash 254
10 Purchases 95,400
Accounts Payable 95,400
Freight-in 600
Accounts Payable 600
13 Office Supplies 24,000
Accounts Payable 24,000
14 Accounts Receivable 24,000
Sales 24,000

14 Accounts Payable 6,000

Purchases Returns and Allowances 6000
17 Cash 30,000
Accounts Receivable 30,000
18 Accounts Payable 4,000
Office Supplies 4,000
19 Cash 18,000
Sales 18,000
20 Accounts Payable 96,000
Cash 96,000
21 Accounts Payable 54,000
Cash 54,000
24 Sales Returns and Allowances 2,000
Accounts Receivable 2,000

Problem 8
Ramos Company and Cammayo Company engaged in the following transactions for the month
of May:
May 4 Ramos sold merchandise on account to Cammayo, P162,000. Terms: FOB
destination, 2/10, n/30. Freight charges amounted to P2,000.
 5 Ramos sold merchandise on account to Cammayo, P710,000. Terms: FOB
shipping point, 2/10, n/30. Freight charges amounted to P8,000.
6 Cammayo paid freight charges on purchase of May 5.
7 Ramos received returned merchandise from Cammayo in the amount of P12,000
from May 4 sale.
9 Ramos received payment from Cammayo for the May 4 transaction.
10 Ramos paid transportation charges on the May 4 shipment.
12 Ramos received payment from Cammayo for the May 5 transaction.
18 Ramos sold merchandise on account to Cammayo, P250,000 list price. Terms:
40% trade discount discount, FOB shipping point, 2/10, n/30.
21 Cammayo paid freight charges on the May 18 transaction, P3,000.
23 Ramos received payment from Cammayo for the amount due from the May 18
transaction.

May 4 Accounts Receivable 162,000

Sales 162,000
Freight-out 2,000
Accounts Payable 2,000
5 Accounts Receivable 162,000
Sales 162,000
Accounts Receivable 8,000
Cash 8,000
6 Cash 8,000
Accounts Receivable 8,000
7 Sales Returns and Allowances 12,000
Accounts Receivable 12,000
9 Cash 147,000
Sales Discount 3,000
Accounts Receivable 150,000
10 Accounts Payable 2,000
Cash 2,000
12 Cash 695,800
Sales Discount 14,200
Accounts Receivable 710,000
18 Accounts Receivable 150,000
Sales 150,000
Accounts Receivable 3,000
Cash 3,000

21 Cash 3,000
Accounts Receivable 3,000

23 Cash 147,000
Sales Discount 3,000
Accounts Receivable 150,000