ABC Co. purchased goods with invoice price of P1,000 on account on Dec. 27, 2022.

The related shipping costs amounted to P10. The seller shipped the goods on Dec. 31,
2022. ABC Co. received the goods on Jan. 2, 2023 and settled the account on
Jan. 5, 2023.

Prepare journal entries under the following terms of purchase

a.FOB shipping point, freight collect
b.FOB destination, freight prepaid
c.FOB shipping point, freight prepaid
d.FOB destination, freight collect

a. FOB shipping point, freight collect

12/27/22 No entry

12/31/22 Purchases 1,000

Accounts payable 1,000

1/2/23 Freight-in 10
Cash 10

1/5/23 Accounts payable 1,000

Cash 1,000

b.FOB destination, freight prepaid

12/27/22 No entry

12/31/22 No entry

1/2/23 Purchases 1,000

Accounts payable 1,000

1/5/23 Accounts payable 1,000

Cash 1,000

c.FOB shipping point, freight prepaid

12/27/22 No entry

12/31/22 Purchases 1,000

Freight-in 10
Accounts payable 1,010

1/2/23 No entry
1/5/23 Accounts payable 1,010
Cash 1,010

d.FOB destination, freight collect

12/27/22 No entry

12/31/22 No entry

1/2/23 Purchases 1,000

Accounts payable 1,000

Accounts payable 10
Cash 10

1/5/23 Accounts payable 990

Cash 990

On December 29, 2021, Entity A purchases goods worth P100,000 on account. Freight
costs amounts to P6,000. The seller ships the goods on December 30, 2021. Entity
A receives the shipment on January 2, 2022 and pays the account on January 5, 2022

Required: Compute for the cost of inventory on December 31, 2021 and the net cash
payment to the supplier on January 5, 2022 under each of the following scena
Cost of Inventory Net Cash Payment
Scenario on Dec. 31, 2021 on Jan. 5, 2022
a. FOB Destination
freight prepaid None 100,000
b. FOB Shipping point
Freight collect 106,000 100,000
c. FOB Destination
Freight collect None 94,000
d. FOB Shipping point
Freight prepaid 106,000 106,000
 27, 2022.
s on Dec. 31,

Freight-in = buyer
Freight-out = seller
 unt. Freight
21. Entity
ary 5, 2022

the net cash

following scenario:
ABC Co. provided you the following information for the purpose of determining
the amount of its inventory as of Dec. 31, 2019
Goods located at the warehouse (physical count) 3,800,000
Goods located at the sales department (at cost) 13,600,000
Goods in-transit purchased FOB destination 1,600,000
Goods in-transit purchased FOB shipping point 2,100,000
Freight incurred for goods purchased under FOB
shipping point 60,000
Goods held on consignment from XYZ, Inc. 1,800,000
How much is the total inventory on Dec. 31, 2019?

ABC Co. consigned goods costing P10,000 to XYZ, Inc. Transportation costs of
delivering the goods to XYZ totaled P2,000. Repair costs for goods damaged
during transportation totaled P500. To induce XYZ Inc. in accepting the consigned
goods, ABC Co. gave XYZ Inc P1,000 representing an advance commission. How
much is the cost of the consigned goods?

Cost of consigned goods

Transportation costs
f determining

3,800,000
13,600,000

2,100,000

60,000

19,650,000

tion costs of
s damaged
ng the consigned
mission. How

10,000
2,000
12,000
Illustration 1
a. Purchased goods worth P10,000 on account
b. Paid shipping costs of P1,000 on the purchase above
c. Returned damaged goods worth P2,000 to the supplier
d. Sold goods costing P5,000 for P20,000 on account
e. A customer returned goods with sale price of P800
and cost of P200.

Required:
1. Prepare the journal entries under (a) Perpetual
inventory system and (b) Periodic inventory system
2. Compute for the gross profit earned during the period
assuming the physical count revealed an inventory
on hand of 105 units costing P40 per unit.

Perpetual System Period

a. Inventory 10,000 Purchases
Accounts payable 10,000 Accounts payable

b. Inventory 1,000 Freight-in

Cash 1,000 Cash

c. Accounts payable 2,000 Accounts payable

Inventory 2,000 Purchase returns

d. Accounts receivable 20,000 Accounts receivable

Sales 20,000 Sales

Cost of sales 5,000 No entry

Inventory 5,000

e. Sales returns 800 Sales returns

 Accounts receivable 800 Accounts receivable

Inventory 200
Cost of sales 200

Sales 20,000 Sales

Less: Sales returns (800) Less: Sales returns
Net sales 19,200 Net sales
Cost of sales (5,000 - 200) (4,800) Cost of sales
Gross profit 14,400 Beg. Inventory
Purchases
Freight-in
Purchase returns
Net purchases
Total goods available for sa
Less: Ending inventory
Gross profit

Illustration 2
Entity A's beginning inventory was P20,000. The following
transactions occurred during the period.
a. Purchases of inventory on account - P450,000
b. Freight costs paid on purchases - P25,000
c. Damaged goods returned to suppliers - P10,000
d. Sales on account - P800,000; Cost of sales - P380,000
e. Sales returns - P9,000 sales price; Cost - P4,275

Required:
1. Prepare the journal entries under (a) Perpetual
inventory system and (b) Periodic inventory system
2. Compute for the gross profit earned during the period
assuming the physical count of ending inventory shows
 a balance of P109,275.

Perpetual Inventory Periodic

a. Inventory 450,000 Purchases
Accounts payable 450,000 Accounts payable

b. Inventory 25,000 Freight-in

Cash 25,000 Cash

c. Accounts payable 10,000 Accounts payable

Inventory 10,000 Purchase returns

d. Accounts receivable 800,000 Accounts receivable

Sales 800,000 Sales

Cost of sales 380,000 No entry

Inventory 380,000

e. Sales returns 9,000 Sales returns

Accounts receivable 9,000 Accounts receivable

Inventory 4,275 No entry

Cost of sales 4,275

Sales 800,000 Sales

Sales return (9,000) Sales return
Net sales 791,000 Net sales
Cost of sales (380,000 - 4,275) (375,725) Cost of sales
Gross profit 415,275 Beg. Inventory
Purchases
Freight-in
Purchase returns
Net purchases
Total goods available for sa
Less: Ending inventory
Gross profit
 Periodic System
10,000
Accounts payable 10,000

1,000
1,000

ts payable 2,000
Purchase returns 2,000

ts receivable 20,000
20,000

800
 Accounts receivable 800

20,000
ales returns (800)
19,200

-
10,000
1,000
se returns (2,000)
9,000
oods available for sales 9,000
nding inventory (4,200) (4,800)
14,400
 Periodic Inventory
450,000
Accounts payable 450,000

25,000
25,000

ts payable 10,000
Purchase returns 10,000

ts receivable 800,000
800,000

9,000
Accounts receivable 9,000

800,000
(9,000)
791,000

20,000
450,000
25,000
se returns -10000
 465,000
oods available for sale 485,000
nding inventory (109,275) (375,725)
415,275
 Date Transaction Units Unit Cost Total Cost
August 1 Inventory 2,000 36.00 72,000
7 Purchase 3,000 37.20 111,600
12 Sales 4,200 -
13 Sales return 600 -
21 Purchase 4,800 38.00 182,400
22 Sales 3,800 -
29 Purchase 1,900 38.60 73,340
30 Purchase return 300 38.60 (11,580)
Total goods available for sale 427,760

Required: Compute for ending inventory and cost of goods sold

under the following cost formulas:
1. FIFO - periodic
2. FIFO - perpetual
3. Weighted average - periodic
4. Weighted average - perpetual

The following information was available from the inventory records of the Brooks
Company for January 2022:
Unit Total
Units Cost Cost
Balance, Jan. 1, 2022 3,000 19.55 58,650.00
Purchases
Jan. 6, 2022 10,200 21.50 219,300.00
Jan. 26, 2022 2,250 20.60 46,350.00
Sales
Jan. 7, 2022 2,700
Jan. 31, 2022 7,200

Required: Compute for the ending inventory and cost of goods sold under each of
the following cost flow formula
a. FIFO Periodic
b. FIFO
c. Weighted Average Cost Periodic
d. Weighted Average cost Perpetual (Moving Average)
An entity purchases inventory with a list price of P10,000 on
account under credit terms of 20%, 10%, 2/10, n/30
Required: Prepare the journal entries using
a. Gross method
b. Net method

Gross Method Net Method

Purchases 7,200 Purchase
Accounts payable 7,200 Accounts payable
(10,000 x 80% x 90% = 7,200) (10,000 x 80% x 90% x 98%)

Accounts payable 7,200 Accounts payable

Purchase discount 144 Cash
Cash 7,056
(7,200 x 2% = 144)

Accounts payable 7,200 Accounts payable

Cash 7,200 Purchase discount lost
Cash
 10,000 x 20% = 2,000
10,000 - 2,000 = 8,000
Method 8,000 x 10% = 800
7,056 8,000 - 800 = 7,200
7,056
0% x 98%)

7,056
7,056

7,056
144
7,200