YOUTH ON THE ROCK

BASIC ACCOUNTING
TUTORIAL

Jessa Paola B.
Diansuy
BASIC ACCOUNTING TUTORIAL P2 1
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Problem 4:
At the beginning of the year, Paradise Co. had an inventory of P200,000. During
the year, the company purchased goods costing P900,000. Paradise Co reported
ending inventory of P300,000 at the end of the year. Their cost of goods sold is
a. P1,000,000
b. P 800,000
c. P1,400,000
d. P 400,000

BASIC ACCOUNTING TUTORIAL P2 3

Problem 4:
At the beginning of the year, Paradise Co. had an inventory of P200,000. During
the year, the company purchased goods costing P900,000. Paradise Co reported
ending inventory of P300,000 at the end of the year. Their cost of goods sold is
a. P1,000,000
b. P 800,000
c. P1,400,000
d. P 400,000

BASIC ACCOUNTING TUTORIAL P2 4

Problem 6:
Presented below is information for Zales Company for the month of January 2019.

Computed for Gross Profit Rate.

a. 60%
b. 30%
c. 45%
d. 50%

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Problem 6:
Presented below is information for Zales Company for the month of January 2019.

Computed for Gross Profit Rate.

a. 60%
b. 30%
c. 45%
d. 50%

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Transportation Costs / Freight
• Freight-in – coming in from the supplier
• Freight-out – transporting goods sold from the seller to buyer

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Shipping terms
1. Free on Board, shipping point - FOB shipping point, seller to point of
shipment
2. Free on board, destination – FOB destination, seller to point of destination

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FOB Shipping point:
• Seller deliver the goods up to the shipping point.
• Seller will no longer responsible for the goods after the shipping point.
• Buyer will take ownership of the goods after the shipping point.
• Buyer shouldered the transportation from shipping point to its destination.
• Freight-in

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FOB Destination:
• Seller deliver the goods up to the destination.
• Seller will be responsible for the goods until it reached the destination.
• Seller still have the ownership of the goods up until it reached the destination.
• Seller shouldered the transportation from shipping point to its destination.
• Freight-out

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 FOB Shipping point, Freight Prepaid
• Buyer shouldered the freight, however the seller has already paid the freight
before shipment.
Example: Seller company sold on account to Buyer company goods invoiced at
P20,000 and paid P600 freight charges. The goods were shipped FOB shipping
point, freight prepaid.
Books of Seller Books of Buyer
Accounts Receivable - Trade 20,000 Purchases 20,000
Sales 20,00 Freight-in 600
0
Accounts Payable - Trade 20,60
Accounts Receivable - Trade 600 0
Cash 600

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FOB Shipping point, Freight Collect
• Buyer shouldered the freight, freight was rightly paid by the buyer.
Example: Seller Co. sold on account to Buyer Co. at P10,000, FOB shipping point,
freight collect. Buyer Co. paid the P400 freight upon receipt of the goods.
Books of Seller Books of Buyer

Accounts Receivable - Trade 10,000 Purchases 10,000

Sales 10,00 Accounts Payable - Trade 10,00
0 0
Freight-in 400
Cash 400

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FOB Destination, Freight Prepaid
• Seller shouldered the freight, freight was rightly paid by the seller.
Example: Seller Co. sold on account to Buyer Co. goods invoiced at P22,000, FOB
destination, freight prepaid. Seller paid shipping company bill of lading for P300.
Books of Seller Books of Buyer

Accounts Receivable - Trade 22,000 Purchases 22,000

Sales 22,00 Accounts Payable - Trade 22,00
0 0
Freight-out 300
Cash 300

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FOB Destination, Freight Collect
• Seller shouldered the freight, however the buyer paid the freight on the
destination point.
Example: Seller Co. sold on account to Buyer Co. P31,000 goods shipped FOB
destination, freight collect. Buyer Co. paid P500 freight.
Books of Seller Books of Buyer

Accounts Receivable - Trade 30,500 Purchases 31,000

Freight-out 500 Accounts Payable - Trade 31,00
0
Sales 31,00
0 Accounts Payable - Trade 500
Cash 500

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 FOB Shipping FOB Shipping
FOB Destination, FOB Destination,
point, Freight point, Freight
Freight Prepaid Freight Collect
Prepaid Collect
Who shouldered the
shipping?
Who owns the
goods at transit?
Who paid the
freight?

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 FOB Shipping FOB Shipping
FOB Destination, FOB Destination,
point, Freight point, Freight
Freight Prepaid Freight Collect
Prepaid Collect
Who shouldered the
shipping? Buyer Buyer Seller Seller

Who owns the

goods at transit? Buyer Buyer Seller Seller

Who paid the

freight? Seller Buyer Seller Buyer

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Flow of Costs in the Manufacturing Process

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Materials, beg. bal. 50,000
Add: Purchases 20,000
Less: Inventory, end bal. ( 10,000
)
Material Used 60,000
Labor 100,000
Overhead
80,000
Total Manufacturing Cost 240,000
Work in Process, beg 30,000
Less: Work in Process, end ( 20,000
)
Cost of Goods Manufactured 250,000
Finished Goods, beg
20,000
Total Good Available for Sale 270,000
Less:BASIC
Finished Goods,
ACCOUNTING endP2
TUTORIAL ( 30,000 20

)
Cost of Goods Sold 240,000
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Question:
9. FOB shipping point means that ownership is transferred at
a. Seller’s place
b. Buyer’s place
c. Point of shipment
d. Point of destination

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Question:
9. FOB shipping point means that ownership is transferred at
a. Seller’s place
b. Buyer’s place
c. Point of shipment
d. Point of destination

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Question:
10. FOB destination, freight prepaid means
a. Seller pays freight and records Freight-out
b. Seller pays freight and adds freight to Accounts Receivable - Trade
c. Buyer shoulder freight and reduces Accounts Payable - Trade
d. Buyer pays freight and records Freight-in

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Question:
10. FOB destination, freight prepaid means
a. Seller pays freight and records Freight-out
b. Seller pays freight and adds freight to Accounts Receivable - Trade
c. Buyer shoulder freight and reduces Accounts Payable - Trade
d. Buyer pays freight and records Freight-in

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Question:
11. FOB shipping point, freight collect means
a. Buyer is owner and pays the freight
b. Buyer is owner and shoulders the freight
c. Seller is owner and pays the freight
d. Seller is owner and shoulders the freight

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Question:
11. FOB shipping point, freight collect means
a. Buyer is owner and pays the freight
b. Buyer is owner and shoulders the freight
c. Seller is owner and pays the freight
d. Seller is owner and shoulders the freight

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Question:
12. Which is not a basic element of manufacturing costs?
a. Materials
b. Labor
c. Capital
d. Overhead

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Question:
12. Which is not a basic element of manufacturing costs?
a. Materials
b. Labor
c. Capital
d. Overhead

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Question:
13. Materials that are used in the production process and physically become part of
the finished products are termed
a. Direct materials
b. Indirect materials
c. All of the above
d. None of the above

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Question:
13. Materials that are used in the production process and physically become part of
the finished products are termed
a. Direct materials
b. Indirect materials
c. All of the above
d. None of the above

BASIC ACCOUNTING TUTORIAL P2 31

Question:
14. Factory overhead consists of
a. All other manufacturing costs and expenses
b. Direct and indirect labor and other manufacturing expenses
c. Indirect materials and indirect labor and other manufacturing costs
d. Direct and indirect materials and labor and other manufacturing costs

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Question:
14. Factory overhead consists of
a. All other manufacturing costs and expenses
b. Direct and indirect labor and other manufacturing expenses
c. Indirect materials and indirect labor and other manufacturing costs
d. Direct and indirect materials and labor and other manufacturing costs

BASIC ACCOUNTING TUTORIAL P2 33