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SUGGESTED ANSWER KEY

A1: FREIGHT EXERCISES

A1.1 Determine who owns the merchandise in transit then determine the sales and purchases of the company
for the month. Assume fiscal year ends September 30 and that delivery only takes 3 days.
Invoice No.
1701

Company
Designation
Buyer

1702
1703
1704

Seller
Seller
Seller

1705
1706
1707
1708

Buyer
Buyer
Seller
Buyer

1709

Buyer

1710

Buyer

Freight Terms
FOB Shipping
Point
FOB Destination
FOB Destination
FOB Shipping
Point
FOB Destination
FOB Destination
FOB Destination
FOB Shipping
Point
FOB Shipping
Point
FOB Destination

Purchases: P13, 800

Shipment
Date
September 12

Amount
800

Buyer

Purchase

September 30
October 7
September 18

10, 000
3, 000
4, 500

Seller
Seller
Buyer

Sales

October 1
September 26
October 4
September 29

8, 200
700
17, 000
12, 300

Seller
Buyer
Seller
Buyer

Purchase
Purchase

October 2

5, 000

Seller

September 30

2, 500

Seller

Sales: P4, 500

A1.2
BUYER
AP
000

1,

Cash
000
Freight In
000
AP
000
Freight In
000
Cash
000
No entry

1,
1,
1,
1,

SELLER
Freight Out
000

1,
AR

1, 000
AR
000
1, 000
No entry

1,
Cash

1,
Freight Out
000
1, 000

1,
Cash

A2: RETURNS AND ALLOWANCES EXERCISES

BUYER
Purchases
AP
000
Freight In
500
AP

SELLER
45, 000
45,
500
Cash

AR

45, 000
Sales

000
SRA

45,
5, 000

AR

5,

000
PRA

000
Purchases
AP
000
AP

5, 000
5,
32, 000
32,
700

AR

32, 000
Sales

000
Freight Out

32,
1, 000

Owner

PRA
700

Cash

1,

000
SRA

700
AR

Purchases
AP
000
AP

20, 000
20,
800
Cash

800
AP

1, 000
1,

PRA
000
Purchases
AP
000
Freight In
AP
000
AP
PRA
000

70, 000
70,
2, 000
2,
8, 000
8,

700
AR

20, 000
Sales

20,

000
Freight Out

800
AR

800
SRA

1, 000
AR

1,

000
AR

70, 000
Sales

70,

000
AR

2, 000
Cash

2,

000
SRA

8, 000
AR

8,

000

A3: DISCOUNTS PART 1 EXERCISES

A3.1 What do these lines mean?
a. Trade discounts: 2%, 8%. Credit terms: 5/10, n/30
The buyer is immediately entitled to 2% and 8% trade discounts. The buyer may avail 5%
discount if payment is made on or before 10 days; the net amount must be paid within 30
days.
b. Trade discounts: 1%, 7%, 2%. Credit terms: 3/15, n/60
The buyer is immediately entitled to 1%, 7% and 2% trade discounts. The buyer may avail
3% discount if payment is made on or before 15 days; the net amount must be paid within 60
days.
c.

Trade discount: 10%. Credit terms: 20/10, 10/20, n/90

The buyer is immediately entitled to a 10% trade discount. The buyer may avail 20%
discount if payment is made on or before 10 days; or avail 10% discount if payment is made
on the 11th 20th day; the net amount must be paid within 30 days.

d. Trade discounts: 6%, 4%. Credit terms: 2/10, EOM, n/30

The buyer is immediately entitled to 6% and 4% trade discounts. The buyer may avail 2%
discount if payment is made on or before the 1 st 10 days of the month following the month of
sale; the net amount must be paid within 30 days from the date of sale.
A3.2 On May 1, UST Co. sold merchandise with a list price of P100, 000.
1.
2.
3.
4.
5.

Trade Discount
8%, 4%
5%
10%, 5%
5%, 3%, 1%
10%

Credit Terms
2/10 EOM, n/60
n/30
2/10, n/30
2/10, 1/15, n/30
2/EOM, n/45

Date Paid
June 8
May 30
May 11
May 16
May 31

Sales
88, 320
95, 000
85, 500
91, 228.50
90, 000

Cash Collected
86, 553.60
95, 000
83, 790
90, 316
88, 200

A4: DISCOUNTS PART 2 EXERCISES

Make the necessary journal entries for the following transactions of Kitty Co. using the three methods (Gross,
Net & Allowance).
Gross
Purchases
70, 000
AP
70, 000

Net
Purchases
AP
600

68, 600
68,

Allowance
Purchases
68, 600
A4PD
1, 400
AP
70,

AR
000

14,

AR
580

Sales
14, 000

13,
Sales

000
AR
000

13,

14,
Sales

580

580

AP

420
AP

13,
A4SD

AP
000

10,

PRA
PRA

9, 800
9,

PRA

800

800

AR

200
AR

10, 000
AR
Sales

10, 000
9,
A4PD

4, 000
4,

000

Sales

3, 680
3,

Sales

680

680

AP
800

320
AP
000

4, 000
3,
A4SD

AP
000

60,

58,

Cash
58, 800
PDisc
200
SRA
000

Cash
58, 800

1,
2,

SRA
940

AR
2,000
Cash
000

12,

1,
AR

12,

AR
12, 000

Cash
58, 800
A4PD
200
SRA
A4SD

1,

940
Cash
000

AR

2,000
Cash
000
A4SD

11, 640
SDiscFor
5,

3,
320
AR

5,

3,
AR

4, 000

Purchases
Input Tax
AP

81, 000
9, 720

AR

89, 600

90, 720

Sales
Output Tax
5

80, 000
9, 600

Purchases
Input Tax
Cash

10, 000
1, 200

Cash

84, 896

11, 200

Sales
Output Tax
9

SRA
Output Tax
AR

12,
360
AR

75, 800
9, 096
2, 000
240
2, 240

5,
Sales

5, 000
Cash
680
A4SD

3, 680

4, 000

360
Cash
000

Sales
5, 000
Cash
680

A5: VAT EXERCISES

1

1, 940
60
AR

SDiscFor

Cash
000

Sales
5, 000
Cash
680
SDisc

1,

12, 000

360
Cash
000

60,

3,
320
AR

10

11

SRA
Output Tax
Cash

500
60

AP

90, 720

560

PDisc
Input Tax
Cash
14

18

1, 620
194
88, 906

Cash
SDisc
Output Tax
AR

85, 613
1, 560
187

Cash

28, 000

87, 360

Sales
Output Tax
20

25

25, 000
3, 000

Purchases
Input Tax
Cash

20, 000
2, 400

Cash
AR

10, 000
34, 800

22, 400

Sales
Output Tax
30

40, 000
4, 800

Output Tax
Input Tax
Vat Payable

26, 009

Vat Payable
Cash

12, 883

13, 126
12, 883
12, 883

A6: INCOME STATEMENT EXERCISES:

A6.1 The following balances were taken from the trial balance of XYZ Company at year-end
Miscellaneous Expense
Utilities Expense
Transportation-In
Purchase Discounts
Depreciation Expense
Salaries Expense
Interest Income
Sales
Returns
and
Allowances
Purchases
Inventory, beginning
Inventory, end
Supplies Expense
Sales Discounts
Transportation-Out
Gross Profit

a.
b.
c.
d.

How
How
How
How

much
much
much
much

is
is
is
is

P 1, 000
15, 000
12, 000
19, 600
10, 000
120, 000
21, 200
8, 000
P400, 000
P90, 000
75, 000
5, 000
4, 000
6, 000
25% based on Net
Sales
*Exercise excerpted*

the COGAS? P482, 400

Gross Sales? P555, 200
the Operating Income? (P20,200)
the Net Income? 0

e.
f.
g. A6.2 The following information is given for XYZ Co.
h.
i. Freight-In
j. P 4, 000
k. Purchase
l. 6, 000
Returns
m. Operating
n. 300, 000
Expense
o. Other
p. 100, 000
Expenses
q. Increase
In
r. 75, 000
Inventory
s. Net Income
t. 250, 000
u. Purchases
v. 1, 100, 000
w.
*Exercise
excerpted*
x.
y.
z.
a. What is the amount of Cost of Goods
Available for Sale? P1, 098, 000
b. What is the amount of sales to be reflected
in the income statement for the year? P1,
673, 000

aa.

ab.