Merchandising

Operations
Chapter Seven

Basic Financial Accounting and Reporting

25th Edition (2023)
Win Ballada
Learning Objectives
• Describe merchandising activities and identify the income
components for a merchandising entity.

• Distinguish between income statements of service and

merchandising entities

• Illustrate the operating cycle of a merchandising entity.

• Be familiar with the different source documents being used by

merchandising entities.

• Compare cash discounts and trade discounts.

• Summarize the treatment of transportation costs considering the

freight terms FOB Destination, FOB Shipping Point, Freight Prepaid
and Freight Collect.
Learning Objectives
• Explain the inventory systems of merchandising entities.

• Analyze and record transactions for merchandise sales under a

periodic inventory system.

• Analyze and record transactions for merchandise purchases under

a periodic inventory system.

• Prepare the entries showing the effects of value-added tax on

merchandising transactions.

• Compare and contrast the entries needed for the periodic and
perpetual inventory system.
Comparison of Income Statements
Service Merchandising

Revenues Net Sales

minus
Cost of Sales
minus equals
Gross Profit
minus
Expenses Operating Expenses
equals
Income from Operations
equals add or minus
Other Income (Expense)
equals
Profit Profit
Operating Cycle of a
Merchandising Business

Cash
Cash

Accounts
Receivable

Inventory
Inventory

Cash Sales Sales on Account

Source Documents
DOCUMENT DESCRIPTION
Sales Invoice Prepared by seller that specifies the amount
of sales and the transportation and payment
terms
Bill of Lading Issued by the carrier that specifies contractual
conditions and terms of delivery
Statement of Account Formal notice to the debtor detailing the
accounts already due
Official Receipt Evidences the receipt of cash by the seller
Deposit slips When validated, indicates that cash/check(s)
with the supplied details were actually
deposited or credited to the account holder
Source Documents
DOCUMENT DESCRIPTION
Check Written order to a bank by the depositor to
pay amount specified in the check from his
checking account to the person named in the
check
Purchase requisition Written request to the purchasing department
from a user department about goods to be
purchased
Purchase order Authorization made by the buyer to the seller
to deliver the merchandise as detailed in the
form
Receiving report Documents the quantities and description of
goods received from a vendor
Credit memorandum Form used by seller to notify the buyer that
his account is being decreased due to errors
or other adjustments
Steps in a Purchase Transaction
1. When certain items are needed, the user department fills in a
purchase requisition form and sends it to the purchasing
department.
2. The purchasing department preparers a purchase order after
checking with the price lists, quotations, or catalogs of approved
vendors.
3. After receiving the purchase order, the seller forwards an invoice
to the purchaser upon shipment of the merchandise
4. Upon receipt, the buyer’s receiving department sees to it that the
terms in the purchase ordere are complied and prepares a
receiving report.
5. Before approving the invoice for payment, the accounts payable
department compares copies of the purchase requisition,
purchase order, receiving report and invoice to ensure that
quantities, descriptions and prices agree.
Terms of Transactions
TERMS DESCRIPTION
Credit Period Period of time allowed for payment
Ex: n/30 means net amount due in 30days
n/10 eom means due date is 10days after
the end of the month
Cash Discounts Discounts given for prompt payment and is
computed on the net amount after the trade
discount
Discount Period Period covered by the discount
Ex: 2/10 means 2% discount if paid within 10 days
Trade Discounts Discounts given by seller to encourage bulk/new
purchases
Transportation Freight Prepaid – seller pays freight upon shipment
Costs Freight Collect – buyer pays freight upo delivery
FOB Shipping Point – buyer shoulders freight
FOB Destination – seller shoulders freight
Perpetual Inventory System
• The inventory account is continuously updated so that both
the inventory and cost of sales account receive entries
throughout the accounting period
• Ending inventory per books is reconciled with the actual
physical count at the end of the period

Periodic Inventory System

• Used mostly by businesses that sell relatively inexpensive
goods and are not using computerized scanning systems to
analyze goods sold
• When goods are purchased, separate accounts are used:
Purchases, Purchase Discounts, Purchase Returns and
Allowances, Transportation In
• Cost of sales is determined as the difference of the goods
available for sale and ending inventory as a result of physical
count
Perpetual vs Periodic Inventory
System
Perpetual

Cost of Goods Sold – Amount per ledger/TB

Inventory
Count Periodic

Beginning Inventory
add
Net Purchases Purchases
equals minus
Goods Available for Sale Purchase Discounts
minus Purchase Returns and Allowances
Ending Inventory equals
equals Net Purchases
Cost of Goods Sold
Accounting for Merchandising Business
IS LINE ITEM DESCRIPTION
Net Sales Gross Sales
Less: Sales Discounts
Sales Returns and Allowances
Gross Sales Revenues from sale of merchandise, whether for cash
or on account, before deduction of any discount or
returns
Sales Trade and cash discounts given to customers
Discounts A contra-revenue account w/ normal debit balance
Sales Returns Return – goods returned by buyer
and Allowance – any other deduction from the selling price
Allowances A contra-revenue account w/ normal debit balance
Transportation Expense account to record shipping costs shouldered
Out by the seller (FOB destination)
Accounting for Merchandising Business
IS LINE ITEM DESCRIPTION
Cost of Sales/ Expense account to record the corresponding cost of
Cost of Goods the goods sold
Sold Amount varies whether the entity uses perpetual or
periodic inventory system and the type of cost flow
assumption – FIFO, LIFO or weighted average
Purchases Cost of goods purchased before any deduction for
discounts or returns
Purchase Trade and cash discounts given by supplier
Discounts A contra-expense account w/ normal credit balance
Purchase Return – goods returned to supplier
Returns and Allowance – any other deduction from the selling price
Allowances A contra-expense account w/ normal credit balance
Transportation Expense account to record shipping costs shouldered
In as the buyer (FOB shipping point)
Value Added Entries
Value Added Tax
• A business tax imposed and collected from the seller in the
course of trade or business on every sale of properties (real
or personal), lease of goods or properties(real of personal),
or vendors of services
• An indirect tax, thus can be passed on to the buyer
• Amount for remittance to BIR is the excess of Output Tax
over Input Tax

Buyer Seller
Input Tax – an asset account Output Tax – a liability account
Purchases xxx Cash/Accounts Receivable xxx
Input Tax xxx Sales xxx
Cash/Accounts Payable xxx Output Tax xxx
Personal Review
Answer the Discussion Questions in page 311
Assignment
Answer Problem#22 on page 347
To be checked next meeting, Sept. 18 (Mon)
The End
Chapter 7: Merchandising Operations
Basic Financial Accounting and Reporting
25th Edition (2023)
Win Ballada
Problem #22
Date JE No. No. Account Dr. Cr.
Feb 1, 2022 JE-01 110 Cash 113,000
120 Accounts Receivable 113,000
Owner investment to medical practice.

Feb 2, 2022 JE-02 210 Accounts Payable 64,000

530 Purchase Discounts 1,920
110 Cash 62,080
Payment of accounts due less discounts.

Feb 4, 2022 JE-03 510 Purchases 170,000

210 Accounts Payable 170,000
Purchased merchandise, FOB Shipping point, 3/10, n/30

Feb 5, 2022 JE-04 120 Accounts Receivable 270,000

410 Sales 270,000
Sold merchandise to Gonzales Inc., FOB Shipping point, 2/10, n/30
Problem #22
Date JE No. No. Account Dr. Cr.
Feb 7, 2022 JE-05 670 Advertising Expense 6,000
110 Cash 6,000
Paid advertising for the month of February

Feb 7, 2022 JE-06 110 Cash 250,000

410 Sales 250,000
Sold merchandise for cash

Feb 8, 2022 JE-07 210 Accounts Payable 170,000

530 Purchase Discounts 5,100
110 Cash 164,900
Paid merchandise purchase on account less cash discount

Feb 9, 2022 JE-08 540 Transportation In 4,000

110 Cash 4,000
Paid freight on purchased merchandise.
Problem #22
Date JE No. No. Account Dr. Cr.
Feb 10, 2022 JE-09 420 Sales returns and Allowances 70,000
120 Accounts Receivable 70,000
Returns from Gonzales Inc.

Feb 12, 2022 JE-10 110 Cash 196,000

430 Sales Discounts 4,000
120 Accounts Receivable 200,000
Collection of amount due from Gonzales Inc.

Feb 14, 2022 JE-11 680 Interest Expense 26,000

110 Cash 26,000
Paid interest on the mortgage payable.

Feb 15, 2022 JE-12 610 Salaries Expense 51,000

110 Cash 51,000
Paid salaries.
Problem #22
Date JE No. No. Account Dr. Cr.
Feb 16, 2022 JE-13 120 Accounts Receivable 392,000
410 Sales 392,000
Sold merchandise to Ronzales Corp., FOB Destination, 2/10, n/30

Feb 18, 2022 JE-14 660 Transportation Out 4,000

110 Cash 4,000
Payment of freight charges on sale to Ronzales Corp last Feb. 16.

Feb 19, 2022 JE-15 140 Supplies 21,000

110 Cash 21,000
Acquired supplies for cash

Feb 20, 2022 JE-16 510 Purchases 125,000

210 Accounts Payable 125,000
Purchased merchandise (Lozada Imports), FOB Destination, 3/10, n/30
Problem #22
Date JE No. No. Account Dr. Cr.
Feb 22, 2022 JE-17 690 Miscellaneous Expense 7,000
110 Cash 7,000
Paid miscellaneous expenses

Feb 23, 2022 JE-18 110 Cash 384,160

430 Sales Discounts 7,840
120 Accounts Receivable 392,000
Collection of amount due from Ronzales Corp.

Feb 24, 2022 JE-19 510 Purchases 373,000

210 Accounts Payable 373,000
Purchased merchandise (Agustin Enterprises), FOB Shipping Point, 3/10, n/

Feb 24, 2022 JE-20 540 Transportation In 9,000

110 Cash 9,000
Paid freight on purchased merchandise from Agustin.
Problem #22
Date JE No. No. Account Dr. Cr.
Feb 25, 2022 JE-21 120 Accounts Receivable 420,000
410 Sales 420,000
Sold merchandise to Ronzales Corp., FOB Shipping Point, 2/10, n/30

Feb 26, 2022 JE-22 420 Sales returns and Allowances 71,000
120 Accounts Receivable 71,000
Returns from Gonzales Inc.

Feb 28, 2022 JE-23 320 Buenaflor, Withdrawals 400,000

110 Cash 400,000
Cash withdrawal by owner.

Feb 28, 2022 JE-24 210 Accounts Payable 25,000

520 Purchase Returns and Allowances 25,000
Returned merchandise purchased from Agustin on June 24
Problem #22
Date JE No. No. Account Dr. Cr.
Feb 28, 2022 ADJ-1 610 Salaries Expense 51,000
220 Salaries Payable 51,000
Accrued salaries at monthend.

Feb 28, 2022 ADJ-2 630 Insurance Expense 2,000

150 Prepaid Insurance 2,000
Insurance expired at monthend

Feb 28, 2022 ADJ-3 640 Depreciation Expense-Bldg. 9,000

650 Depreciation Expense-Equipt. 12,000
175 Accumulated Depreciation - Building 9,000
185 Accumulated Depreciation - Equipment 12,000
Depreciation on the building and equipment for the month.

Feb 28, 2022 ADJ-4 620 Supplies Expense 58,000

140 Supplies 58,000
Supplies utilized during the month.
Problem #22

Date JE No. No. Account Dr. Cr.

Feb 28, 2022 CLE-1 410 Sales 1,332,000
520 Purchase Returns and Allowances 25,000
530 Purchase Discounts 7,020
130 Merchandise Inventory, end 397,000
330 Income Summary 1,761,020
Close revenue and other accounts w/ credit bal. to income summary
Problem #22
Date JE No. No. Account Dr. Cr.
Feb 28, 2022 CLE-2 330 Income Summary 1,472,840
130 Merchandise Inventory, beg 413,000
420 Sales Returns and Allowances 141,000
430 Sales Discounts 11,840
510 Purchases 668,000
540 Transportation In 13,000
610 Salaries Expense 102,000
620 Supplies Expense 58,000
630 Insurance Expense 2,000
640 Depreciation Expense - Bldg. 9,000
650 Depreciation Expense - Equipt. 12,000
660 Transportation Out 4,000
670 Advertising Expense 6,000
680 Interest Expense 26,000
690 Miscellaneous Expense 7,000
Close expense and other accounts w/ debit bal. to income summary
Problem #22
Date JE No. No. Account Dr. Cr.
Feb 28, 2022 CLE-3 330 Income Summary 288,180
310 Buenaflor, Capital 288,180
Close income summary to owner capital account.

Feb 28, 2022 CLE-4 310 Buenaflor, Capital 400,000

320 Buenaflor, Withdrawals 400,000
Close withdrawal account to owner capital account.
Problem #22
Cash 110
Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb. 1, 2022 33,000
Feb 1, 2022 JE-01 113,000 146,000
Feb 2, 2022 JE-02 62,080 83,920
Feb 7, 2022 JE-05 6,000 77,920
Feb 7, 2022 JE-06 250,000 327,920
Feb 8, 2022 JE-07 164,900 163,020
Feb 9, 2022 JE-08 4,000 159,020
Feb 12, 2022 JE-10 196,000 355,020
Feb 14, 2022 JE-11 26,000 329,020
Feb 15, 2022 JE-12 51,000 278,020
Feb 18, 2022 JE-14 4,000 274,020
Feb 19, 2022 JE-15 21,000 253,020
Feb 22, 2022 JE-17 7,000 246,020
Feb 23, 2022 JE-18 384,160 630,180
Feb 24, 2022 JE-20 9,000 621,180
Feb 28, 2022 JE-23 400,000 221,180
Problem #22
Accounts Receivable 120
Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb. 1, 2022 192,000
Feb 1, 2022 JE-01 113,000 79,000
Feb 5, 2022 JE-04 270,000 349,000
Feb 10, 2022 JE-09 70,000 279,000
Feb 12, 2022 JE-10 200,000 79,000
Feb 16, 2022 JE-13 392,000 471,000
Feb 23, 2022 JE-18 392,000 79,000
Feb 25, 2022 JE-21 420,000 499,000
Feb 26, 2022 JE-22 71,000 428,000

Merchandise Inventory 130

Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb. 1, 2022 413,000
Feb 28, 2022 CLE-1 397,000 810,000
Feb 28, 2022 CLE-2 413,000 397,000
Problem #22
Supplies 140
Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb. 1, 2022 51,000
Feb 19, 2022 JE-15 21,000 72,000
Feb 28, 2022 ADJ-4 58,000 14,000

Prepaid Insurance 150

Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb. 1, 2022 48,000
Feb 28, 2022 ADJ-2 2,000 46,000

Land 160
Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb. 1, 2022 460,000
Problem #22
Building 170
Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb. 1, 2022 1,750,000

Accumulated Depreciation - Building 175

Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb. 1, 2022 - 350,000
Feb 28, 2022 ADJ-3 9,000 9,000

Equipment 180
Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb. 1, 2022 2,310,000

Accumulated Depreciation - Equipment 185

Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb. 1, 2022 630,000
Feb 28, 2022 ADJ-3 12,000 12,000
Problem #22
Accounts Payable 210
Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb. 1, 2022 108,000
Feb 2, 2022 JE-02 64,000 44,000
Feb 4, 2022 JE-03 170,000 214,000
Feb 8, 2022 JE-07 170,000 44,000
Feb 20, 2022 JE-16 125,000 169,000
Feb 24, 2022 JE-19 373,000 542,000
Feb 28, 2022 JE-24 25,000 517,000

Salaries Payable 220

Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb 28, 2022 ADJ-1 51,000 51,000

Mortgage Payable 230

Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb. 1, 2022 2,600,000
Problem #22
Buenaflor, Capital 310
Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb. 1, 2022 1,569,000

Buenaflor, Withdrawals 320

Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb 28, 2022 JE-23 400,000 400,000

Income Summary 330

Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb 28, 2022 CLE-1 1,761,020 1,761,020
Feb 28, 2022 CLE-2 1,472,840 288,180
Feb 28, 2022 CLE-3 288,180 -
Problem #22
Sales 410
Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb 5, 2022 JE-04 270,000 270,000
Feb 7, 2022 JE-06 250,000 520,000
Feb 16, 2022 JE-13 392,000 912,000
Feb 25, 2022 JE-21 420,000 1,332,000
Feb 28, 2022 CLE-1 1,332,000 -

Sales Returns and Allowances 420

Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb 10, 2022 JE-09 70,000 70,000
Feb 26, 2022 JE-22 71,000 141,000
Feb 28, 2022 CLE-2 141,000 -

Sales Discounts 430

Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb 12, 2022 JE-10 4,000 4,000
Feb 23, 2022 JE-18 7,840 11,840
Feb 28, 2022 CLE-2 11,840 -
Problem #22
Purchases 510
Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb 4, 2022 JE-03 170,000 170,000
Feb 20, 2022 JE-16 125,000 295,000
Feb 24, 2022 JE-19 373,000 668,000
Feb 28, 2022 CLE-2 668,000 -

Purchase Returns and Allowances 520

Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb 28, 2022 JE-24 25,000 25,000
Feb 28, 2022 CLE-1 25,000 -

Purchase Discounts 530

Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb 2, 2022 JE-02 1,920 1,920
Feb 8, 2022 JE-07 5,100 7,020
Feb 28, 2022 CLE-1 7,020 -
Problem #22
Transportation In 540
Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb 9, 2022 JE-08 4,000 4,000
Feb 24, 2022 JE-20 9,000 13,000
Feb 28, 2022 CLE-2 13,000 -

Salaries Expense 610

Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb 15, 2022 JE-12 51,000 51,000
Feb 28, 2022 ADJ-1 51,000 102,000
Feb 28, 2022 CLE-2 102,000 -

Supplies Expense 620

Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb 28, 2022 ADJ-4 58,000 58,000
Feb 28, 2022 CLE-2 58,000 -
Problem #22
Insurance Expense 630
Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb 28, 2022 ADJ-2 2,000 2,000
Feb 28, 2022 CLE-2 2,000

Depreciation Expense - Bldg. 640

Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb 28, 2022 ADJ-3 9,000 9,000
Feb 28, 2022 CLE-2 9,000 -

Depreciation Expense - Equipt. 650

Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb 28, 2022 ADJ-3 12,000 12,000
Feb 28, 2022 CLE-2 12,000 -
Problem #22
Transportation Out 660
Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb 18, 2022 JE-14 4,000 4,000
Feb 28, 2022 CLE-2 4,000 -

Advertising Expense 670

Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb 7, 2022 JE-05 6,000 6,000
Feb 28, 2022 CLE-2 6,000 -

Interest Expense 680

Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb 14, 2022 JE-11 26,000 26,000
Feb 28, 2022 CLE-2 26,000 -

Miscellaneous Expense 690

Date Reference Debit Credit Dr. Bal. Cr. Bal.
Feb 22, 2022 JE-17 7,000 7,000
Feb 28, 2022 CLE-2 7,000 -
Teresita Buenaflor Shoes

Pr.22
Worksheet
February 28, 2022
Unadjusted TB Adjustments Adjusted TB
Dr. Cr. Dr. Cr. Dr. Cr.
Cash 221,180 221,180
Accounts Receivable 428,000 428,000
Merchandise Inventory 413,000 413,000
Supplies 72,000 58,000 14,000
Prepaid Insurance 48,000 2,000 46,000
Land 460,000 460,000
Building 1,750,000 1,750,000
Accumulated Depreciation - Building 350,000 9,000 359,000
Equipment 2,310,000 2,310,000
Accumulated Depreciation - Equipment 630,000 12,000 642,000
Accounts Payable 517,000 517,000
Salaries Payable - 51,000 51,000
Mortgage Payable 2,600,000 2,600,000
Buenaflor, Capital 1,569,000 1,569,000
Buenaflor, Withdrawals 400,000 400,000
Sales 1,332,000 1,332,000
Sales Returns and Allowances 141,000 141,000
Sales Discounts 11,840 11,840
Purchases 668,000 668,000
Purchases Returns and Allowances 25,000 25,000
Purchases Discounts 7,020 7,020
Transportation In 13,000 13,000
Salaries Expense 51,000 51,000 102,000
Supplies Expense - 58,000 58,000
Insurance Expense - 2,000 2,000
Depreciation Expense - Bldg. - 9,000 9,000
Depreciation Expense - Equipt. - 12,000 12,000
Trasportation Out 4,000 4,000
Advertising Expense 6,000 6,000
Interest Expense 26,000 26,000
Miscellaneous Expense 7,000 7,000
Income Summary -
7,030,020 7,030,020 132,000 132,000 7,102,020 7,102,020
Teresita Buenaflor Shoes

Pr.22
Worksheet
February 28, 2022
Adjusted TB Closing Entries Post-closing TB
Dr. Cr. Dr. Cr. Dr. Cr.
Cash 221,180 221,180
Accounts Receivable 428,000 428,000
Merchandise Inventory 413,000 397,000 413,000 397,000
Supplies 14,000 14,000
Prepaid Insurance 46,000 46,000
Land 460,000 460,000
Building 1,750,000 1,750,000
Accumulated Depreciation - Building 359,000 359,000
Equipment 2,310,000 2,310,000
Accumulated Depreciation - Equipment 642,000 642,000
Accounts Payable 517,000 517,000
Salaries Payable 51,000 51,000
Mortgage Payable 2,600,000 2,600,000
Buenaflor, Capital 1,569,000 400,000 288,180 1,457,180
Buenaflor, Withdrawals 400,000 400,000 -
Sales 1,332,000 1,332,000 -
Sales Returns and Allowances 141,000 141,000 -
Sales Discounts 11,840 11,840 -
Purchases 668,000 668,000 -
Purchases Returns and Allowances 25,000 25,000 -
Purchases Discounts 7,020 7,020
Transportation In 13,000 13,000 -
Salaries Expense 102,000 102,000 -
Supplies Expense 58,000 58,000 -
Insurance Expense 2,000 2,000 -
Depreciation Expense - Bldg. 9,000 9,000 -
Depreciation Expense - Equipt. 12,000 12,000 -
Trasportation Out 4,000 4,000
Advertising Expense 6,000 6,000
Interest Expense 26,000 26,000 -
Miscellaneous Expense 7,000 7,000
Income Summary - 1,761,020 1,761,020
7,102,020 7,102,020 2,161,020 2,161,020 5,626,180 5,626,180
Problem #22
Teresita Buenaflor Shoes
Statement of Income
For the month ended February 28, 2022

Sales 1,332,000
Less: Sales Discounts 11,840
Sales Returns & Allowances 141,000 152,840
Net Sales 1,179,160
Cost of Goods Sold
Merchandise Inventory, beginning 413,000
Purchases 668,000
Less: Purchase Discounts (7,020)
Purchase Returns & Allowances (25,000)
Net Purchases 635,980
Transportation In 13,000
Net Cost of Purchases 648,980
Goods available for sale 1,061,980
Less: Merchandise Inventory, ending 397,000
Cost of Goods Sold 664,980
Gross Profit 514,180
Problem #22
Teresita Buenaflor Shoes
Statement of Income
For the month ended February 28, 2022

Net Sales 1,179,160

Cost of Goods Sold 664,980
Gross Profit 514,180
Operating Expenses
Salaries Expense 102,000
Supplies Expense 58,000
Depreciation Expense - Equipt. 12,000
Depreciation Expense - Bldg. 9,000
Advertising Expense 6,000
Trasportation Out 4,000
Insurance Expense 2,000
Miscellaneous Expense 7,000 200,000
Income from Operations 314,180
Finance Costs 26,000
Net Income 288,180
Problem #22

Teresita Buenaflor Shoes

Statement of Changes in Equity
For the month ended February 28, 2022

Buenaflor, Capital, beginning 1,569,000

Add: Investments -
Add: Net income for the month 288,180 288,180
Total 1,857,180
Less: Withdrawals (400,000)
Buenaflor, Capital, ending 1,457,180
 Problem #22
Teresita Buenaflor Shoes
Balance Sheet
February 28, 2022

ASSETS LIABILITIES AND EQUITY

Current Assets Liabilities
Cash 221,180 Accounts Payable 517,000
Accounts Receivable 428,000 Salaries Payable 51,000
Merchandise Inventory 397,000 Mortgage Payable 2,600,000
Supplies 14,000 Total Liabilities 3,168,000
Prepaid Insurance 46,000
Total Current Assets 1,106,180
Noncurrent Assets
Land 460,000
Medical Building 1,750,000
Accumulated Depreciation - Medical Building (359,000)
Medical Equipment 2,310,000
Accumulated Depreciation - Medical Equipment (642,000)
Total Noncurrent Assets 3,519,000 Buenaflor, Capital 1,457,180

Total Assets 4,625,180 Total Liabilities and Equity 4,625,180