Bookkeeping NC III

Institutional Assessment III

Demonstrative Problem on Merchandising Business

Problem 3.

Listed below are the accounts for January transactions of Papasa Ako Company:

CHART OF ACCOUNTS

110 Cash
120 Accounts Receivable
125 Allowance for Bad Debts
130 Merchandise Inventory
140 Office Supplies
150 Prepaid Insurance
160 Land
170 Building
175 Accumulated Depreciation Building
180 Equipment
185 Accumulated Depreciation Equipment
210 Accounts Payable
220 Notes Payable
230 Salaries Payable
310 Papasa Ako, Capital
320 Papasa Ako, Withdrawals
330 Income Summary
410 Sales
420 Sales Returns and Allowances
430 Sales Discounts
510 Purchases
520 Purchases Returns and Allowances
530 Purchases Discounts
540 Freight In
610 Salaries Expense
620 Supplies Expense
630 Insurance Expense
640 Depreciation Expense Building
650 Depreciation Expense Equipment
660 Freight Out
670 Advertising Expense
680 Interest Expense
690 Bad Debts Expense
700 Cost of Goods Sold

During the month of January 2017, the following transactions occurred:

January 1 Invested P200,000 cash, a parcel of land worth P500,000 and a building worth
P800,000 to be used in the business.
3 Bought equipment worth P60,000 for cash.
5 Bought Office Supplies for cash, P30,000.
7 Purchased merchandise on account from Pray Muna Company, P200,000.
Terms: 3/10, n/30
8 Sold merchandise on account to Tiwala Lang Company, P200,000. The cost is
P100,000 with a term of 2/15, n/30
9 Returned P50,000 worth of merchandise purchased last January 7 from
Pray Muna Company.
10 Paid P10,000 for the freight charges for delivering merchandise last January 7.
12 Paid the full amount for the merchandise purchased from Pray muna
Company.
14 Bought insurance worth P3,000 in cash that is good for 3 months period.
15 Borrowed cash of P50,000 from Kayang Kaya Company and issued a note.
16 Received returns from Tiwala Lang Company, worth P40,000 and cost of
P20,000
18 Paid P10,000 for the freight charges for delivering merchandise last January 8.
19 Received payment in full from Tiwala Lang Company.
20 Purchased merchandise for cash, P50,000.
21 Sold merchandise for cash, P100,000. Cost is P50,000.
22 Paid P30,000 for the note from the cash borrowed from Kayang Kaya
Company.
24 Paid salaries to workers, P10,000.
25 Purchased merchandise on account from Nasa Diyos ang Awa, Nasa Tao ang
Gawa Company worth P150,000 with down payment of P50,000 cash
and balance is in term of n/15.
26 Paid P50,000 worth of merchandise from January 25 transaction.
27 Sold merchandise on account to Hugod Ro Kailangan Company worth P 100,000
with down payment of P20,000. Cost is P50,000. Terms: n/30
28 Received payment of P50,000 from Hugod Ro Kailangan Company.
29 Paid advertisement worth P 5,000.
29 Paid interest worth P 5,000
30 Papasa Ako withdrew P20,000 cash from the business.

The ending inventory is P175,500

Additional Information (for adjustment purposes):

1. Office Supplies on hand is P10,000.
2. Building is depreciated annually with salvage value P200,000 and a useful life of 10 years.
(Depreciate 1 month period only)
3. Equipment is depreciated annually with no salvage value and a useful life of 5 years.
(Depreciate 1 month period only)
4. Prepaid Insurance unexpired portion is P2,000.
5. Salaries to workers of P10,000 was incurred but not yet paid.
6. Set up Bad Debts, 2% of Net Sales.
Using Periodic Inventory and Perpetual Inventory Method, you are required to prepare the following:
1. Prepare Journal Entries
2. Prepare Ledger
3. Prepare Trial Balance
4. Prepare Adjusting Entries
5. Prepare Adjusted Trial Balance
6. Prepare the following financial statements:
a. Income Statement
b. Statement of Changes in Owners Equity
c. Statement of Financial Position
d. Statement of Cash Flows
7. Prepare closing entries and close the book.
8. Prepare post-closing trial balance