MULTI-STEP INCOME STATEMENT

Sales P368,000
Less: Sales Ret. & Allow. P 4,000
Sales Discount 25,000 29,000
Net Sales P339,000
Cost of Sales
Merchandise Invty. Jan. 1 78,500
Purchases P112,000
Add: Transportation in 8,000
120,000
Less: Purch Ret. & Allow. 7,500
Purch Discount 6,000 13,500
Net Purchases P106,500
Total Goods Available for Sale 185,000
Less Merchandise Invty. Jan. 31 95,000
Cost of Sales 90,000
Gross Profit P249,000
Less: Distribution Costs (Selling)
Rent P90,000
Salaries 91,300
Communication 33,750
Commission 30,000
Depreciation 16,500
Transportation out 11,000
Pag-ibig 1,826
SS & EC 3,088
PhilHealth 1,200 -278,664
Administrative Costs
Rent 30,000
Communication 11,250
Taxes 10,170 -51,420
Operating Loss 81,084
Less Loss from Sale of Land 43,000
Net Loss P 124,084

FUNCTION OF EXPENSE
FORM INCOME STATEMENT Line items
Net Sales (note 1) ₱ 691,370
Cost of Sales (note 2) 346,530
Gross Margin 344,840
Selling Expenses (note 3) -175,760
Administrative Expenses (note 4) -43,800
Operating Income 125,280
Interest Expense -5,400
Net Income ₱ 119,880

Notes to Financial statements

Note 1: Sales P719,800
Less Sales Discount P10,400
18,030 28,430
Net Sales 691,370

Note 2: Merchandise Invty. Beg.

Add: Net Cost of Purchases
Purchases 364,000
Purchase Returns 3,400
Less: Purchase Discount 1,900 5,300
Total Goods Available for Sale
Less: Merchandise Invty. End
Cost of Sales

Note 3: Distribution Expenses-

Advertising
Sales Commission
Salaries & Wages – Store
Depreciation Expense
Store Utilities
Freight Out
Supplies Expense

Note 4: Administrative Expense

Salaries & Wages – Office
Bad Debts Expense
Depreciation Expense
Supplies Expense

FOB Shipping point (freight prepaid)

Seller

Accounts Receivable 151,000

Sales 150,000
Cash 1,000
Buyer
Purchases 150000
Freight-in 1000
AP 151,000

FOB Shipping point (freight collect)

Seller

AR 150000
Sales 150000

Buyer

Purchases 150000
Freight-in 1000
AP 150000
Cash 1000

FOB Destination (Freight prepaid)

Seller
AR 150000
Freight-out 1000
Sales 150000
Cash 1000

Buyer
Purchases 150000
AP 150000

FOB Destination (Freight collect)

Seller

AR 149000
Freight-out 1000
Sales 150000

Buyer

Purchases 150000
AP 149000
Cash 1000
VAT (Value- added tax) 12%

Sales Output Tax

Purchases Input tax

Buyer
Purchases 10000 net of vat
Input tax 1200 vat
AP 11200 invoce amount

Seller
AR 11200 invoice amount
Sales 10000 net of vat
Output tax 1200 vat

Sales Returns - P1,000 invoice amount

Buyer
AP 1000
Input tax 107.14
Purchases Returns and Allowances 892.86

Seller
Sales Returns and Allowances 892.86
Output tax 107.14
AR 1000
balance sheet

330,000

330,084
 P69,350

358,700
428,050
81,520
346,530

P 40,000
40,000
19,000
15,000
30,600
22,000
9,160
P175,760

P 20,000
15,000
6,500
2,300
P 43,800
EX 1
Feb-15 Purchases (2,000 x P150) 300,000
Jul-15 Purchases (3,000 x P180) 540,000
Total Purchases 5,000 840,000

FIFO Sales (4,000 x P350)

Cost of goods sold: (2,000 x P150) 300,000
(2,000 x P180) 360,000
Gross Profit

Gross profit rate

STOCK CARD (SUBSIDIARY LEDGER)

Item: Frame
Code no. 001
Received (DR) Issued (CR)

Qty. Unit Cost Total Cost Qty.

Feb-15 2,000 150 300,000

1-Apr 1,200
Jun-30 180 500
Jul-15 3,000 180 540,000

Aug-15 300
2,000

Total 5,000 840,000 4,000

EX 7 n/30
Periodic Method (Purchases)
DEBIT CREDIT
Feb-15 Purchases 300,000
Accounts Payable 300,000

Mar-15 Accounts Payable 300,000

Cash 300,000

1-Apr Accounts Receivable 420,000

Sales (1,200 x 350) 420,000
 May-01 Cash 420,000
Accounts Receivable 420,000

Jun-30 Accounts Receivable 175,000

Sales (500 x 350) 175,000

Jul-15 Purchases 540,000

Accounts Payable 540,000

Jul-30 Cash 175,000

Accounts Receivable 175,000

Aug-15 Accounts Payable 540,000

Cash 540,000

Accounts Receivable 805,000

Sales (2,300 x 350) 805,000

Sep-15 Cash 805,000

Accounts Receivable 805,000

Dec-31 Merchandise Inventory 180,000

Income Summary 180,000
(setting up of ending inventory)

Purchases 840,000
Less: ending invntory 180,000
Cost of sales 660,000

EX 4 1 2 3

Beg Invty - 120,000 50,000

Purchases 300,000 300,000 300,000
 Freight in 25,000 - 40,000
Ret & allow - 5,000 - 55,000 -
Discounts - - 15,000 -
Net Purch 320,000 230,000 340,000
TGAS 320,000 350,000 390,000
End Invty - - - 75,000
COS 320,000 350,000 315,000

beg invty + net purchases = end invty + cos

5 CASE Sales COS GP OPE

A 440,000 225,000 215,000 140,000
B 260,000 185,000 75,000 105,000
C 870,000 640,000 230,000 320,000
D 1,250,000 825,000 425,000 275,000
E 1,300,500 721,250 579,250 675,000

SALES - COS = OPE + NP (NL)

I
I
D
I
DIRECT-NP INDIRECT - NP
SALES PURCHASES
END INVTY COS
GP BEG INVTY
NI OPE
fifo Cost of
Aug-15
Total cost of sales

1,400,000 100% Sales (4,000 x P350)

Less: Cost of Sales
660,000 47% Purchases 840,000
740,000 53% Less: Ending Inventory
(1000 x 180) 180,000
53% Gross Profit

Issued (CR) Balance

Unit Cost Total Cost Qty. Unit Cost Total Cost

2,000 150 300,000

150 180,000 800 150 120,000 585,000
150 75,000 300 150 45,000
300 150 45,000 90,000
150 3,000 180 540,000 3,300 177.27
150 45,000
180 360,000 1,000 180 180,000 2,300 177.27
150
150 660,000

Perpetual Method (Merchandise Inventory)

DEBIT CREDIT
Feb-15 Merchandise Inventory 300,000
Accounts Payable 300,000

Mar-15 Accounts Payable 300,000

Cash 300,000

Apr-01 Accounts Receivable 420,000

Sales 420,000
 Cost of Sales 180,000 Feb-15
Merchandise Inventory 180,000 Jul-15
(COROLLARY ENTRY FOR THE COST)
May-01 Cash 420,000
Accounts Receivable 420,000
Dec-31
Jun-30 Accounts Receivable 175,000
Sales (500 x 350) 175,000

Cost of Sales 75,000

Merchandise Inventory 75,000

Jul-15 Merchandise Inventory 540,000

Accounts Payable 540,000

Jul-30 Cash 175,000

Accounts Receivable 175,000

Aug-15 Accounts Payable 540,000

Cash 540,000

Accounts Receivable 805,000

Sales 805,000

Cost of Sales 405,000

Merchandise Inventory 405,000

Sep-15 Cash 805,000

Accounts Receivable 805,000

COST OF SALES MERCHANDISE INVENTORY

180,000 Feb-15 300,000 180,000 1-Apr
75,000 Jul-15 540,000 75,000 Jun-30
405,000 405,000 Aug-15

660,000 840,000 660,000

Dec-31 180,000
4 5

10,000 -
300,000 300,000 DIRECT -COS INDIRECT - COS
 15,000 25,000 BEG INVTY RET & ALLOW
- 21,000 - 11,000 PURCHASES DISCOUNT
- - 18,550 NET PURCHASES END INVTY
294,000 295,450 FREIGHT IN
304,000 295,450 TGAS
- 75,500 - 85,000
228,500 210,450

NP (NL)
75,000
- 30,000
- 90,000
150,000
- 95,750

I
D
D
D
 1,400,000

660,000
740,000

/3,300

585,000

407,727.27
Merchandise Inventory
300,000 180,000 1-Apr
540,000 390,000 Aug-15

840,000 570,000

270,000 GL
Problem 2 & 3
DATE ACCOUNT TITLE
CASE A Aug 10 Purchases
Freight In
Accounts Payable (35,000 + 1,000)
Cash

15 Accounts Payable
Cash

20 Accounts Payable
Cash
Purchase Discount (35,000 x 2%)

Case B Sep-08 Purchases

Accounts Payable

11 Freight In
Cash

18 Accounts Payable
Purchase Discount (10,000 x 2%)
Cash

Case C Oct-01 Purchases

Accounts Payable

14 Accounts Payable (8,000 x 60%)

Cash

17 Accounts Payable
Cash

Case D Nov-01 Purchases

Accounts Payable

Dec-05 Accounts Payable

Cash
F DEBIT CREDIT
40,000
1,000
36,000
5,000

18,000
18,000

18,000
17,300
700

10,000
10,000

500
500

10,000
200
9,800

8,000
8,000

4,800
4,800

3,200
3,200

6,000
6,000

6,000
6,000
PROBLEM 4
DATE ACCOUNT TITLE F
1-Apr Furniture & Fixtures
Cash in Bank
# Voucher 72

3-Apr Equipment (44,800/1.12)

Input tax (40,000 x .12)
Accounts Payable
# PI 95990

5-Apr Equipment (1,344/1.12)

Input tax (1,200 x .12)
Cash on Hand
# Voucher 73

8-Apr Purchases (12,320/1.12)

Input tax (11,000 x .12)
Accounts Payable
#PI 05108

9-Apr Freight-in (616/1.12)

Input tax (550 x .12)
Cash on Hand
#Voucher 74

11-Apr Accounts Payable

Purchases Ret & Allowances (5,600/1.12)
Input tax (5,000 x .12)
#CM 128

12-Apr Accounts Payable

Cash in Bank
#Voucher 75

13-Apr Purchases (17,360/1.12)

Input tax (15,500 x .12)
Cash in Bank
#Voucher 76
 16-Apr Purchases (30,800 /1.12)
Freight-in (1,400/1.12)
Input tax (27,500 x.12)+(1,250 x .12)
Accounts Payable (30,800 +1,400)
#PI 72199

18-Apr Accounts Payable (44,800-15,000)

Cash in Bank
#Voucher 77

20-Apr Cash on Hand

Purchases Ret & Allow (1,792/1.12)
Input tax (1,600 x .12)
#OR513

25-Apr Accounts Payable

Purchases Discount (27,500 x .02)
Input tax (550 x .12)
Cash in Bank
#Voucher 78

Name: Koleman
Terms: 2/10, n/60
Date Explanation F
Apr. 3 GJ1
12 Partial payment GJ1
18 Full payment GJ1

Name: Arcy's
Terms: 1/10, n/60
Date Explanation F
Apr. 8 PI 05108 GJ1
11 Credit memo GJ1

Name: Purefoods
Terms: 2/10, n/30
Date Explanation F
Apr. 16 PI 72199 GJ1
25 Full payment GJ1
DEBIT CREDIT
60,000
60,000

40,000
4,800
44,800

1,200 ACCOUNTS PAYABLE

144 11-Apr 5,600 44,800 3-Apr
1,344 12-Apr 15,000 12,320 8-Apr
18-Apr 29,800 32,200 16-Apr
25-Apr 32,200
11,000
1,320 82,600 89,320
12,320
6,720 Arce Dairy

550
66
616

5,600
5,000
600

15,000
15,000

15,500
1,860
17,360
 27,500
1,250
3,450
32,200

29,800
29,800

1,792
1,600
192

32,200
550
66
31,584

Debit Credit Balance

44,800 44,800
15,000 29,800
29,800 0

Debit Credit Balance

12,320 12,320
5,600 6,720

Debit Credit Balance

32,200 32,200
32,200 0