MERCHANDISING PROBLEM “PERIODIC INVENTORY SYSTEM (SAMPLE PROBLEM)

Lovelove Supplies Unlimited is a merchandising business the commence its operation on June 1, 2016. It is
owned by Mr. Micko Gonzales. It uses a “Periodic Inventory System”. The transaction for the month of June.

1 Mr. Gonzales deposited P100, 000 in Metrobank in the name of the business, Lovelove Supplies
Unlimited.
2 Bought a computer on account P20, 000.
3 Purchased merchandise, P35, 000 from Nice Traders. Terms: FOB shipping point; 3/10,n/30.
5 Acquired office supplies in cash P2, 500.
6 Sold merchandise on account to Hate Company, P61, 000, Terms: FOB Shipping point; 2/10,n/30.
8 Paid the amount due to Nice Traders.
8 Paid RM Freight P1,500 for delivering merchandise purchase last June 3.
10 Purchase merchandise from Lockheart Company, P30, 000.
11 Received returns from Hate Company, P7, 500.
12 Received payment from Hate Company less return and discounts.
13 Received refund for poor quality merchandise purchase on June 10 amounting to 4, 000.
14 Borrowed P25, 000 from Metrobank by issuing a note.
15 Paid salaries, P21, 000.
16 Sold merchandise on account to January Company, P60, 000. Terms: FOB destination; 2/10,n/30. Cost
of merchandise P30, 000.
16 Paid P2, 000 freight charges on the sale of June 16.
19 Purchased P32, 000 of merchandise from Lockheart Company on account. Terms: FOB destination;
3/10,n/30.
20 Returned P3, 000 of merchandise purchased on June 19.
23 Sold merchandise costing P27, 000 for cash.
25 Acquired supplies on account, P4, 600.
26 Made refunds to cash customer for defective merchandise P3, 000.
28 Mr. Gonzales withdrew P20, 000 from the business.
30 Paid the following operating expenses: salaries P22, 250, rent P5, 000, advertising P2, 500 and utilities
P1, 890.
30 The ending inventory of Lovelove Supplies Unlimited amounted to P8, 200.

Chart of Accounts:
101 Cash, 105 Accounts Receivable, 115 Merchandise Inventory, 120 Supplies, 125 Equipment, 201 Accounts
Payable, 205 Notes Payable, 301 Gonzales Capital, 305 Gonzales Drawings, 401 Sales, 405 Sales Returns &
Allowances, 410 Sales Discount, 501 Purchases, 505 Purchases Returns & Allowances, 510 Purchase
Discounts, 515 Freight In, 520 Advertising Expense, 525, Rent Expense, 530 Salaries Expense, 535 Utilities
Expense, 540 Freight Out, 605 Income Summary

Required:
1. Journal Entries
2. Ledger
3. Trial Balance
4. Statement of Cost of Goods Sold
5. Statement of Performance
6. Statement of Equity
7. Statement of Financial Position
8. Statement of Cash Flows
9. Closing Entries
10. Post – Closing Trial Balance

1.
 GENERAL JOURNAL (SAMPLE FORMAT)

GENERAL JOURNAL
PAGE NUMBER GJ-1
With Explanations

CURRENT JOURNAL ENTRIES

DATE DESCRIPTION REF DEBIT CREDIT
2016
June 1 Cash 101 P100000
Gonzales Capital 301 P100000
To record the deposited investment

2 Equipment 125 20000

Accounts Payable 201 20000
To record the bought computer on account

3 Purchases 501 35000

Accounts Payable 201 35000
To record the purchased merchandise

5 Supplies 120 2500

Cash 101 2500
To record the acquired supplies in cash

6 Accounts Receivable 105 61000

Sales 401 61000
To record sold merchandise on account

8 Accounts Payable 201 35000

Purchase Discounts 510 1050
Cash 101 33950
To record the payment to Nice Trading

8 Freight-In 515 1500

Cash 101 1500
To record the payment for freight

10 Purchases 501 30000

Cash 101 30000
To record purchased merchandise

11 Sales Returns and Allowances 405 7500

Accounts Receivable 105 7500
To record the merchandise returns from Hate Company
 GENERAL JOURNAL (SAMPLE FORMAT)

GENERAL JOURNAL
PAGE NUMBER GJ-2
With Explanations

CURRENT JOURNAL ENTRIES

DATE DESCRIPTION REF DEBIT CREDIT
2016
June 12 Cash 101 P52430
Sales Discount 410 1070
Accounts Receivable 105 P53500
To record the received payment from Hate Company

13 Cash 101 4000

Purchases Returns and Allowances 505 4000
To record the received refund from merchandise purchased

14 Cash 101 25000

Notes Payable 205 25000
To record the borrowed money from Metrobank

15 Salaries Expense 530 21000

Cash 101 21000
To record payment for salaries

16 Accounts Receivable 105 60000

Sales 401 60000
To record the sold merchandise

16 Freight-Out 540 20000

Cash 101 20000
To record the payment for freight

19 Purchases 501 32000

Accounts Payable 201 32000
To record the purchased merchandise on account

20 Accounts Payable 201 3000

Purchases Returns and Allowances 505 3000
To record returned merchandise

25 Supplies 120 4600

Accounts Payable 205 4600
To record the acquired supplies on account
 GENERAL JOURNAL (SAMPLE FORMAT)

GENERAL JOURNAL
PAGE NUMBER GJ-3
With Explanations

CURRENT JOURNAL ENTRIES

DATE DESCRIPTION REF DEBIT CREDIT
2016
June 26 Sales Returns and Allowances 405 P3000
Cash 101 P3000
To record the cash refund to cash customer

28 Gonzales Drawings 305 20000

Cash 101 20000
To record the withdrawals from the business

30 Salaries Expense 530 22250

Rent Expense 525 5000
Advertising Expense 520 2500
Utilities Expense 535 1890
Cash 101 31640
To record payment for the expenses
 GENERAL LEDGER (SAMPLE FORMAT)

GENERAL LEDGER
PAGE NUMBER GL-1
Account 101 CASH
Date Item Post Debit Credit Balance
2016 Debit Credit
June 1 Investment GJ-1 100000 100000
5 Supplies GJ-1 2500 97500
8 Merchandise GJ-1 33950 63550
8 Freight-In GJ-1 1500 62050
10 Merchandise GJ-1 30000 32050
12 From Receivables GJ-2 52430 84480
13 Purchases Returns GJ-2 4000 88480
14 Borrowed money GJ-2 25000 113480
15 Salaries GJ-2 21000 92480
16 Freight-Out GJ-2 2000 90480
23 Sales GJ-2 27000 117480
26 Sales Returns GJ-3 3000 114480
28 Drawings GJ-3 20000 94480
30 Operating Expenses GJ-3 31640 62480

Account 105 ACCOUNTS RECEIVABLE

Date Item Post Debit Credit Balance
2016 Debit Credit
June 6 Receivables GJ-1 61000 61000
11 Receivables GJ-1 7500 53500
12 Receivables GJ-2 53500 0
16 Receivables GJ-2 60000 60000

Account 120 SUPPLIES

Date Item Post Debit Credit Balance
2016 Debit Credit
June 5 Supplies GJ-1 2500 2500
25 Supplies GJ-2 4600 7100
 GENERAL LEDGER (SAMPLE FORMAT)

GENERAL LEDGER
PAGE NUMBER GL-2
Account 125 EQUIPMENT
Date Item Post Debit Credit Balance
2016 Debit Credit
June 2 Equipment GJ-1 20000 20000

Account 201 ACCOUNTS PAYABLE

Date Item Post Debit Credit Balance
2016 Debit Credit
June 2 Payable GJ-1 20000 20000
3 Equipment GJ-1 35000 55000
8 Payment GJ-1 35000 20000
19 Purchases GJ-2 32000 52000
20 Merchandise GJ-2 3000 49000
25 Supplies GJ-2 4600 53600

Account 205 NOTES PAYABLE

Date Item Post Debit Credit Balance
2016 Debit Credit
June 14 Notes Payable GJ-2 25000 25000

Account 301 GONZALES CAPITAL

Date Item Post Debit Credit Balance
2016 Debit Credit
June 1 Investment GJ-1 100000 100000
30 Closing GJ-4 460 99540
30 Closing GJ-4 20000 79540
 GENERAL LEDGER (SAMPLE FORMAT)

GENERAL LEDGER
PAGE NUMBER GL-3
Account 305 GONZALES DRAWINGS
Date Item Post Debit Credit Balance
2016 Debit Credit
June 28 Withdrawals GJ-3 20000 20000
30 Closing GJ-4 20000 0

Account 401 SALES

Date Item Post Debit Credit Balance
2016 Debit Credit
June 6 Sales GJ-1 61000 61000
16 Sales GJ-2 60000 121000
23 Sales GJ-2 27000 148000
30 Closing GJ-4 148000 0

Account 405 SALES RETURNS AND ALLOWANCES

Date Item Post Debit Credit Balance
2016 Debit Credit
June 11 Sales Returns GJ-1 7500 7500
26 Sales Returns GJ-3 3000 10500
30 Closing GJ-4 10500 0

Account 410 SALES DISCOUNT

Date Item Post Debit Credit Balance
2016 Debit Credit
June 12 Sales Discount GJ-2 1070 1070
30 Closing GJ-4 1070 0
 GENERAL LEDGER (SAMPLE FORMAT)

GENERAL LEDGER
PAGE NUMBER GL-4
Account 501 PURCHASES
Date Item Post Debit Credit Balance
2016 Debit Credit
June 3 Merchandise GJ-1 35000 35000
10 Merchandise GJ-1 30000 65000
19 Merchandise GJ-2 32000 97000
30 Closing GJ-4 97000 0

Account 505 PURCHASES RETURNS AND ALLOWANCES

Date Item Post Debit Credit Balance
2016 Debit Credit
June 13 Returned Merchandise GJ-2 4000 4000
20 Returned Merchandise GJ-2 3000 7000
30 Closing GJ-4 7000 0

Account 510 PURCHASE DISCOUNTS

Date Item Post Debit Credit Balance
2016 Debit Credit
June 8 Purchase Discount GJ-1 1050 1050
30 Closing GJ-4 1050 0

Account 515 FREIGHT-IN

Date Item Post Debit Credit Balance
2016 Debit Credit
June 8 Freight-In GJ-1 1500 1500
30 Closing GJ-4 150 0
 GENERAL LEDGER (SAMPLE FORMAT)

GENERAL LEDGER
PAGE NUMBER GL-5
Account 520 ADVERTISING EXPENSE
Date Item Post Debit Credit Balance
2016 Debit Credit
June 30 Advertising Expense GJ-3 2500 2500
30 Closing GJ-4 2500 0

Account 525 RENT EXPENSE

Date Item Post Debit Credit Balance
2016 Debit Credit
June 30 Rent Expense GJ-1 5000 5000
3 Closing GJ-4 5000 0

Account 530 SALARIES EXPENSE

Date Item Post Debit Credit Balance
2016 Debit Credit
June 15 Salaries Expense GJ-2 21000 21000
30 Salaries Expense GJ-3 22250 43250
30 Closing GJ-4 43250 0

Account 535 UTILITIES EXPENSE

Date Item Post Debit Credit Balance
2016 Debit Credit
June 30 Utilities Expense GJ-3 1890 1890
30 Closing GJ-4 1890 0
 GENERAL LEDGER (SAMPLE FORMAT)

GENERAL LEDGER
PAGE NUMBER GL-6
Account 540 FREIGHT-OUT
Date Item Post Debit Credit Balance
2016 Debit Credit
June 16 Freight-Out GJ-2 2000 2000
30 Closing GJ-4 2000 0

Account 605 INCOME SUMMARY

Date Item Post Debit Credit Balance
2016 Debit Credit
June 30 Closing GJ-4 136430 136430
30 Closing GJ-4 82250 54180
30 Closing GJ-4 54640 460
30 Closing GJ-4 460 0

Account
Date Item Post Debit Credit Balance
Debit Credit

Account
Date Item Post Debit Credit Balance
Debit Credit
 TRIAL BALANCE (SAMPLE FORMAT)

LOVELOVE SUPPLIES UNLIMITED

PRELIMINARY TRIAL BALANCE
JUNE 30, 2016
ACCOUNT TITLES DR CR
101 Cash P 62840
105 Accounts Receivable 60000
120 Supplies 7100
125 Equipment 20000
201 Accounts Payable P 53600
205 Notes Payable 25000
301 Gonzales Capital 100000
302 Gonzales Drawings 20000
401 Sales 148000
405 Sales Returns and Allowances 10500
410 Sales Discount 1070
501 Purchases 97000
505 Purchases Returns and Allowances 7000
510 Purchase Discounts 1050
515 Freight-In 1500
520 Advertising Expense 2500
525 Rent Expense 5000
530 Salaries Expense 43250
535 Utilities Expense 1890
540 Freight-Out 2000

P 334650 P 334650
TOTALS
 STATEMENT OF COST OF GOODS SOLD (SAMPLE FORMAT)

LOVELOVE SUPPLIES UNLIMITED

STATEMENT OF COST OF GOODS SOLD
FOR THE MONTH ENDED, JUNE 30, 2016
(IN PESOS)

Beginning Inventory P0
Add: Purchases 97000
Freight-In 1700
98500
Less: Purchases Returns and Allowances (7000)
Purchase Discounts (1050)
Net Cost of Purchases 90450
Goods Available for Sale 90450
Less: Ending Inventory, June 30, 2016 (8200)
Cost of Goods Sold P 82250
 STATEMENT OF PERFORMANCE & STATEMENT OF EQUITY
(SAMPLE FORMAT)

LOVELOVE SUPPLIES UNLIMITED

STATEMENT OF PERFORMANCE
FOR THE MONTH ENDED, JUNE 30, 2016
(IN PESOS)

Gross Sales P 148000

Less: Sales Returns and Allowances P 10500
Sales Discount 1070 (11570)
Net Sales 136430
Less: Cost of Goods Sold (82250)
Gross Profit 54180
Less: Operating Expenses
Salaries Expense 43250
Rent Expense 5000
Advertising Expense 2500
Freight-Out 2000
Utilities Expense 1890 (54640)
Net Loss P 460

LOVELOVE SUPPLIES UNLIMITED

STATEMENT OF EQUITY
FOR THE MONTH ENDED, JUNE 30, 2016
(IN PESOS)

Beginning Capital, June 1, 2016 P 100000

Less: Net Loss (460)
Add: Gonzales Drawings (2000)
Ending Capital, June 30, 2016 P 79540
 STATEMENT OF FINANCIAL POSITION (SAMPLE FORMAT)

LOVELOVE SUPPLIES UNLIMITED

STATEMENT OF FINANCIAL POSITION
AS OF JUNE 30, 2016

(IN PESOS)
ASSETS
Current Assets
Cash P 62840
Accounts Receivable 60000
Merchandise Inventory 8200
Supplies 7100
Total Current Assets 138140
Non-Current Assets
Equipment 20000
TOTAL ASSETS P 158140

LIABILITIES
Current Liabilities
Accounts Payable P 53600
Non-Current Liabilities
Notes Payable 25000

OWNER’S EQUITY
Gonzales Capital 79540
TOTAL LIABILITIES & OWNER’S EQUITY P 158140
 STATEMENT OF CASH FLOWS (SAMPLE FORMAT)

LOVELOVE SUPPLIES UNLIMITED

STATEMENT OF CASH FLOWS
FOR THE MONTH ENDED, JUNE 30, 2016
(in pesos)

CASH FLOWS FROM OPERATING ACTIVITIES

Cash Received from:
Sales P 27000
Collected from receivables 52430
Refund from Purchases 4000
Total 83430
Cash Payment for:
Merchandise Bought (63950)
Operating Expenses (52640)
Cash refund to customer (3000)
Supplies (2500)
Freight on sold goods (2000)
Freight on purchased merchandise (1500)
TOTAL CASH FLOWS FROM OPERATING ACTIVITIES (42160)

CASH FLOWS FROM INVESTING ACTIVITIES P0

CASH FLOWS FROM FINANCING ACTIVITIES

Gonzales Investment P 100000
Borrowed money from the Bank 25000
Gonzales Drawings (20000)
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 105000

INCREASE IN CASH AND CASH EQUIVALENTS 62840

ADD CASH & CASH EQUIVALENTS, JUNE 1, 2016 0

CASH & CASH EQUIVALENTS, JUNE 30, 2016 P 62840

 CLOSING JOURNAL ENTRIES (SAMPLE FORMAT)

GENERAL JOURNAL
PAGE NUMBER GJ-4
With Explanations

CLOSING JOURNAL ENTRIES

DATE DESCRIPTION REF DEBIT CREDIT
2016
June 30 Sales P 148000
Sales Returns and Allowances P 10500
Sales Discount 1070
Income Summary 136430
To close the sales account

30 Merchandise Inventory 8200

Purchases Returns and Allowances 7000
Purchase Discount 1050
Income Summary 82250
Purchases 97000
Freight-In 1500
To Close the purchases account

30 Income Summary 54640

Salaries Expense 43250
Rent Expense 5000
Advertising Expense 2500
Freight-Out 2000
Utilities Expense 1890
To close the expenses account

30 Gonzales Capital 460

Income Summary 460
To close the income summary

30 Gonzales Capital 20000

Gonzales drawings 20000
To close the drawings account
 POST-CLOSING TRIAL BALANCE (SAMPLE FORMAT)

LOVELOVE SUPPLIES UNLIMITED

POST CLOSING TRIAL BALANCE
JUNE 30, 2016
(in pesos)
ACCOUNT TITLES DR CR
101 Cash P 62840
105 Accounts Receivable 60000
115 Merchandise Inventory 8200
120 Supplies 7100
125 Equipment 20000
201 Accounts Payable P 53600
205 Notes Payable 25000
301 Gonzales Capital 100000

P 158140 P 158140