BNE Tutorial 12/14/19

1. On December 5, 2019, Masagana Trading Co. purchase merchandise with a list price of P85,000. The merchandise is subject
to a trade discount of 15%, 10%, 5%. With credit terms of 2/10, n/30.

Required: Answer the following questions based from the above data.

1. How much is the Invoice Price?

2. At what amount should Masagana debit purchases?
3. How much is the trade discount?
4. How much is the cash discount?
5. Up to what date is the discount period?
6. If Masagana make payment on Dec. 15, how much should it pay in full settlement of its account?
7. If Masagana make payment on Dec. 20, how much should it pay in full settlement of its account?

2. Assume Mr. Aguilar of Davao sold to Mr. Pringle of Manila on account. The invoice showed the following:
Price of merchandise P 14,000
Freight (to Manila) 1,000
Total P 15,000
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Required: Prepare the journal entries to be recorded in separate books of Aguilar and Pringle, under the following
scenarios.

1. Transaction is FOB Shipping Point, Prepaid.

2. Transaction is FOB Shipping Point, Collect.
3. Transaction is FOB Destination, Prepaid.
4. Transaction is FOB Destination, Collect.

3. Motortrade Company uses a perpetual inventory system. During December, the following transactions and
events occurred.

December 13 Sold 6 motors at a cost of P44,000 each to Motorors Company, terms 1/10,
n/30. The motors cost Motortrade P25,000 each.

December 16 One defective motor was returned to seller.

December 23 Received payment in full from Motorors.

Required: Journalize the transactions for both parties. Motorors also uses perpetual inverntory system.

4. On December 1, Skati Bicycle Store had an inventory of 10 ten speed bicycles at a cost of P25,000 each. During the month of
December, the following transactions occurred.

December 4 Purchased 30 bicycles at a cost of P20,000 each from Pedicab Company, terms
2/10, n/30.
December 6 Sold 18 bicycles to Team Siklista for P300 each, terms 2/10, n/30. (use FIFO)
December 7 Received credit from Pedicab Company for the return of 2 defective bicycles.
December 13 Issued a credit memo to Team Siklista for the return of a defective bicycle.
December 14 Paid Pedicab Company in full, less discount.

Required: Journalize the transactions in the books of Skati Bicycle assuming he uses perpetual system.
5. Cone Supply Company uses a periodic inventory system. During December, the following
transactions and events occurred.

Dec. 3 Purchased 80 backpacks at P20 each from Cole Company, terms 2/10, n/30.
Dec. 6 Received credit of P100 for the return of 5 backpacks purchased on Dec. 3 that
were defective.
Dec. 9 Sold 15 backpacks for P40 each to Starr Books, terms 2/10, n/30.
Dec. 13 Paid Cole Company in full.

Required: Journalize the transactions in the books of Cone supply.

6. The income statement of Slaughter, Inc. includes the items listed below:
Net sales P900,000
Gross profit 320,000
Beginning inventory 80,000
Purchase discounts 15,000
Purchase returns and allowances 8,000
Freight-in 10,000
Operating expenses 300,000
Purchases 540,000

Required: Use the appropriate items listed above as a basis for determining:
(a) Cost of goods sold.
(b) Cost of goods available for sale.
(c) Ending inventory.

7. The following selected transactions were completed during July between Sela Company and Baye Company:

July 1 Sela sold merchandise on account to Baye, P23,500, terms FOB destination, 2/15, n/EOM.

July 2 Sela paid shipping costs of P1,700 for delivery of merchandise to Baye.

July 5 Sela sold merchandise to Baye, P35,000 with downpayment of 50% and the balance on account, terms
FOB shipping point, n/EOM.

July 6 Baye returned P4,000 of merchandise purchased on account on July 1.

July 9 Baye paid shipping charges of P1,400 for the July 5 transaction.

July 15 Sela sold merchandise on account to Baye, P40,000, terms FOB shipping point, 1/10, n/30. Sela paid the
transportation cost of P3,500 which was added to the invoice.

July 19 Baye paid in full Sela for July 1 transaction.

July 26 Baye paid in full Sela for July 15 transaction.

July 31 Baye paid in full Sela for July 5 transaction.

Required: Journalize the transactions for (1) Sela Company and (2) Baye Company.

8. Accounts Receivable of Brownlee Company shows a debit balance of P52,000 at the end of the year. An aging of the
individual accounts indicates estimated uncollectible accounts to be P5,350. Prepare the adjusting entry assuming:
a. The Allowance for Uncollectible Accounts has a credit balance of P1,400 before adjustment.
b. The Allowance for Uncollectible Accounts has a debit balance of P1,400 before adjustment.

9. On Jan. 1, 2019, the balance of Accounts Receivable and the Allowance for Bad Debts were P430,000 and P3,400
respectively. During 2019, credit sales were P3,500,000 and collections were P2,400,000. In addition, P38,000 in
uncollectible accounts was written off as worthless. Management estimates the end-of-year uncollectible accounts
receivable to be 1% of the Accounts Receivable ending balance. Journalize necessary entries.
 BGSM Company
Trial Balance
December 31, 2019

Debit Credit
Cash 7,525
Accounts Receivable 10,780
Merchandise Inventory 30,950
Store Supplies 3,411
Prepaid Insurance 3,100
Store Equipment 38,700
Accumulated Dep - Store
Equip. 17,100
Accounts Payable 13,800
Tenorio, Capital 44,644
Tenorio, Drawing 13,500
Sales 103,750
Sales Returns and
Allowances 2,487
Sales Discount 1,500
Purchases 63,200
Purchase Returns and
Allowances 21,155
Purchase Discount 2,856
Freight In 3,761
Sales Salaries Expense 12,000
Other Selling Expense 4,114
Rent Expense 5,100
Miscellaneous Expense 3,177
Total 203,305 203,305

Required: Prepare an eight-column worksheet. Use the following data for adjustments:

a. Merchandise inventory at December 31, 2019 – P34,727.

b. Unused store supplies at December 31, 2019 – P1,804.
c. Expired insurance for the year 2019 – P1,700.
d. Estimated depreciation on store equipment – P5,800.
e. Unpaid sales salaries at December 31, 2019 – P1,580.
f. 5% of outstanding accounts receivable is doubtful of collection.
1. Prepare the Income Statement, Balance Sheet and Statement of Capital
2. Journalize the adjusting entries.
3. Journalize the closing entries.
4. Prepare a post-closing trial balance.

Trust in the LORD with all your heart, and do not lean on your own understanding.
Proverbs 3:5
Solution for Problem 10
BGSM Company
Work Sheet
For the Month Ended December 31, 2019
Trial Balance Adjustment Income Statement Balance Sheet
Account Title
Debit Credit Debit Credit Debit Credit Debit Credit
Cash 7,525 7,525
Accounts Receivable 10,780 10,780
Allowance for Doubtful Accounts (f) 539 539
Merchandise Inventory 30,950 (a2) 34,727 (a1) 30,950 34,727
Store Supplies 3,411 (b)1,607 1,804
Prepaid Insurance 3,100 (c ) 1,700 1,400
Store Equipment 38,700 38,700
Accumulated Dep - Store Equip. 17,100 (d) 5,800 22,900
Accounts Payable 13,800 13,800
Salaries Payable (e) 1,580 1,580
Tenorio, Capital 44,644 44,644
Tenorio, Drawing 13,500 13,500
Income Summary (a1) 30,950 (a2) 34,727 30,950 34,727
Sales 103,750 103,750
Sales Returns and Allowances 2,487 2,487
Sales Discount 1,500 1,500
Purchases 63,200 63,200
Purchase Returns and Allowances 21,155 21,155
Purchase Discount 2,856 2,856
Freight In 3,761 3,761
Sales Salaries Expense 12,000 (e) 1,580 13,580
Other Selling Expense 4,114 4,114
Rent Expense 5,100 5,100
Miscellaneous Expense 3,177 3,177
Store Supplies Expense (b)1,607 1,607
Insurance Expense (c ) 1,700 1,700
Depreciation Expense (d) 5,800 5,800
Doubtful Accounts Expense (f) 539 539
203,305 203,305 76,903 76,903 137,515 162,488 108,436 83,463
NET INCOME 24,973 24,973
162,488 162,488 108,436 108,436
 Adjusting Entries

a1 Income Summary 30,950

Merchandise Inventory 30,950
To close balance of beginning inventory

a2 Merchandise Inventory 34,727

Income Summary 34,727
To record balance of ending inventory

b Store Supplies Expense 1,607

Store Supplies 1,607
To take up supplies used

c Insurance Expense 1,700

Prepaid Insurance 1,700
To take up expired portion of insurance

d Depreciation Expense 5,800

Accumulated Depreciation 5,800
To take up depreciation of store equipment

e Salaries Expense 1,580

Salaries Payable 1,580
To take up unpaid salaries at Dec. 31

f Doubtful Accounts Expense 539

Allowance for Doubtful Accounts 539
To take up provision for the estimated doubtful accounts
 Closing Entries

Sales 103,750
Purchase R&A 21,155
Purchase Discount 2,856
Income Summary 127,761
To close nominal account with credit balances

Income Suumary 106,565

Sales R&A 2,487
Sales Discount 1,500
Purchases 63,200
Freight in 3,761
Sales Salaries Expense 13,580
Other Selling Expense 4,114
Rent Expense 5,100
Miscellaneous Expense 3,177
Store Supplies Expense 1,607
Insurance Expense 1,700
Depreciation Expense 5,800
Doubtful Accounts Expense 539
To close nominal account with debit balances

Income Summary 21,196

Tenorio, Capital 21,196
To close the net income to capital

Tenorio, Capital 13,500

Tenorio, Drawing 13,500
To close the owner's drawing account
 BGSM Company
Income Statement
For the Month Ended December 31, 2019
Sales 103,750
Less: Sales R&A 2,487
Sales Discount 1,500 3,987
Net Sales 99,763
Less: COGS
Mer. Inv, Beg 30,950
Add: Purchases 63,200
Freight In 3,761
Total 66,961
Less: PR&A 21,155
P. Discount 2,856 24,011
Net Purchases 42,950
COGAS 73,900
Less: Mer. Inv, End 34,727
Cost of Goods Sold 39,173
Gross Profit 60,590
Less: Sales Salaries Expense 13,580
Other Selling Expense 4,114
Rent Expense 5,100
Miscellaneous Expense 3,177
Store Supplies Expense 1,607
Insurance Expense 1,700
Depreciation Expense 5,800
Doubtful Accounts Expense 539 35,617
NET INCOME 24,973

BGSM Company
Statement of Capital
For the Year Ended December 31, 2019
Capital, Beginning 44,644
Add: Net Income for the Month 24,973
Total 69,617
Less: Drawing 13,500
Capital, Ending 56,117
 BGSM Company
Balance Sheet
December 31, 2019
ASSETS
Current Assets:
Cash 7,525
Accounts Receivable 10,780
Less: Allowance for Doubtful Accounts 539 10,241
Merchandise Inventory 34,727
Store Supplies 1,804
Prepaid Insurance 1,400
Total Current Assets 55,697

Non-Current Assets:
Store Equipment 38,700
Less: Accumulated Dep. 22,900 15,800
TOTAL ASSETS 71,497

LIABILITIES
Accounts Payable 13,800
Salaries Payable 1,580
TOTAL LIABILITIES 15,380

CAPITAL
Tenorio, Capital 56,117
TOTAL LIABILITIES AND CAPITAL 71,497

BGSM Company
Post-Closing Trial Balance
December 31, 2019
Debit Credit
Cash 7,525
Accounts Receivable 10,780
Allowance for Doubtful Accounts 539
Merchandise Inventory 34,727
Store Supplies 1,804
Prepaid Insurance 1,400
Store Equipment 38,700
Accumulated Dep - Store Equip. 22,900
Accounts Payable 13,800
Salaries Payable 1,580
Tenorio, Capital _________ 56,117
Total 94,936 94,936