Assignment Guide No.

3: Accounting for a Merchandise Business

The account balances for Honda Co. as of November 30, 2019 (unless otherwise indicated), are as
follows:

Cash ₱932,100 Honda, Capital (1/1/19) ₱?

Accounts Receivable 234,000 Honda, Drawing 10,000
Allowance for Doubtful Accounts 6,900 Sales 760,000
Merchandise Inventory ? Sales Returns 75,050
Store Equipment 115,000 Cost of Merchandise Sold 360,500
Acc. Dep. – Store Eqpt. (1/1/19) 31,625 Sales Salaries Expense 77,000
Building 4,000,000 Miscellaneous Selling Expense 2,800
Acc. Dep. – Bldg. (1/1/19) 2,010,000 Office Salaries Expense 44,000
Accounts Payable 211,450 Miscellaneous Administrative Expense 1,650
Note Payable (Due 2024) 50,000

Basic information:
 Honda Co. uses the perpetual inventory system and the weighted average costing method.
 The company sells its inventory at a uniform gross profit rate based on cost.
 The inventory stock card reveals that the November 30, 2019 merchandise inventory balance
is composed of 1,000 units, with the latest weighted average unit cost at ₱532.
 Honda offers trade and cash discounts only in the month of December.

The following are the transactions for December of the current year:
December 2 Purchased 500 units of merchandise in cash costing ₱250,000, FOB Shipping Point.
December 3 Issued a debit memo for return of 50 units of merchandise bought on credit costing
₱450 each due to some defects with Honda receiving credit from the seller.
December 5 Sold 120 units of merchandise for cash, FOB Shipping Point. Honda gave a 3% trade
discount.
December 7 Purchased 200 units of merchandise on account from Yamaha Corp., ₱65,000, FOB
Destination.
December 8 Sold 400 units of merchandise on account to Kawasaki Corp, FOB Destination.
December 9 Purchased 480 units of merchandise in cash costing ₱270,000, FOB Shipping Point.
December 10 Issued a credit memo to Kawasaki for 40 defective units of merchandise.
December 12 Paid the account with Yamaha.
December 13 Sold 70 units of merchandise on account, FOB Shipping Point.
December 15 Purchased 100 units of merchandise on credit from Suzuki Corp., at ₱580 per unit,
FOB Destination.
December 18 Received a credit memo from Suzuki for the return of 15 defective units of
merchandise.
December 20 Paid the account with Suzuki.
December 22 Sold 650 units of merchandise on credit and gave a 0.5% trade discount, FOB
Destination.
December 23 Purchased 120 units of merchandise in cash at a cost of ₱370 per unit, FOB Shipping
Point.
December 30 Sold 130 units of merchandise on account, FOB Shipping Point.

The following are given data on December 31, 2019 for adjustments:
a) The accountant carefully performed an aging of receivables and came up with the following:
Age Percent on the AR Balance Probability of Collection
Not yet due (30-day credit period) 40% 95%
Up to 15 days past due 30% 90%
16-30 days past due 20% 85%
31-50 days past due 10% 80%
b) The store equipment was purchased on April 1, 2016. It has been depreciated using the
straight-line method with no residual value. At the start of the current year, it was determined
that the remaining useful life is five years less than the original estimated useful life and the
residual value is ₱15,000.
 c) The building was purchased on May 30, 2013. It has a residual value of ₱400,000. At the start
of the current year, it was determined that useful life of the equipment is 12 years from the
date of acquisition and the residual value was ₱450,000.
d) The notes payable was acquired at the end of July of this year at a semi-annual rate of 12%.
The notes payable will be paid at the date of maturity with the accrued interest to be paid
every after 3 months from the date of the issuance of the note.
e) Salaries for the month of December has not been recorded and paid yet.
f) Last year, a cash withdrawal of the owner amounting to ₱15,000 was erroneously charged to
salaries expense. The error has been discovered in the current year and no adjustment yet has
been made as of year-end.
g) Credit sales of ₱299,000 had been ommitted from the financial statements for the year ended
December 31, 2018.

Requirements:
1. Prepare the appropriate journal entries and the corresponding adjusting entries.
2. Prepare the following financial statements in good form, as of and for the year ending Dec.
31, 2019:
a) Statement of Financial Position
b) Statement of Financial Performance
c) Statement of Changes in Equity

Instructions:
1. Use A4 paper size, 8-1/4 x 11-3/4, preferably encoded or printed. Alternatively, you may
write your assignment on a clean sheet(s) of yellow paper (do not write at the back and
undecipherable handwriting will not merit any reading).
2. Upload your assignment on the Assignment No. 3 bin provided on the course site. If you
encounter problems uploading using the course site, you may upload it via email by attaching
the file (if printed form) or you may scan or take a picture of your assignment (if handwritten)
then send through email.

Due Date: November 19, 2020

ASSESSMENT CRITERIA/RUBRIC:

Rubric for Journal and Adjusting Entries

Criteria 10 5 2
All journal entries were All journal entries, except Most journal entries were
recorded in good form three, were recorded in not recorded in good form
Completeness (in chronological order, good form (in chronological (not in chronological order,
proper indention, order, proper indention, no proper indention, not
double-entry system) double-entry system) double-entry system)
Use of accurate At most three wrong use of Inaccurate use of accounts,
accounts; accurate accounts but accurate amounts and debit/credit
Accuracy
amounts; accurate use amounts; accurate use
debit/credit debit/credit;
Neat, clear,
Neat, handwriting may be
Neatness handwriting easy to Messy, difficult to read
hard to read at times
decipher
Rubric for Financial Statements
Category 10 5 3 1
All of the All of the financial All of the Some of the
financial statements are in good financial financial statements
statements are form as required with statements are are not in good
Completeness
presented in good no more than three included but form; contains
form as required errors on the complete contains several errors on those
set errors presented
All accounts and All accounts and their Some accounts and
their values as values as presented, ------------------ their values as
Accuracy
presented are except for three items, presented are
accurate are accurate inaccurate
Neat, clear, Neat, clear, Neat, Messy, difficult to
handwriting easy handwriting usually handwriting read
Neatness
to decipher easy to decipher may be hard to
read at times