Illustrative Problem 1

Case Problem: DOLE DISTRIBUTOR

April 01 The business DOLE DISTRIBUTOR was registered as single proprietorship with the
Department of Trade and Industry, Juan Lopez invested P39, 000

02 Bought computer equipment for P10,000 cash

/ Bought merchandise on account from LOWTOWN Supply Co. P15, 900, Term, 2/10, n/30

03 Bought office supplies on cash basis for P700

04 Sold merchandize on account P15,200 FOB Destination, terms 2/10, n/30

05 Paid P200 freight on April 4 sale

06 Received credit memo LOWTOWN Supply Co. for merchandise return P300

11 Paid LOWTOWN

13 Collected from April 4 customers

14 Bought merchandise on cash basis for P14,400

15 Salaries paid P1,500

16 Borrowed money from RCBC Bank, signed a promissory note for P12,000

17 Received refund from a supplier on cash purchase of April 14, P500

18 Bought merchandize from MESDA, P14,200 FOB Shipping, term, 2/10, n/30

20 Paid freight on April 18 purchase P700

23 Sold merchandise for P16, 400

26 Bought merchandise for cash P12,300

27 Paid MESDA on April 18 purchase, P9,000. No discount allowed on partial payment

28 J. Lopez get cash from the business, P2,008

29 Made refund to cash customer for defective merchandise, P900

30 Sold merchandise on account, P13,700 2/30

Paid the following: Advertising P1,000, Utilities P400, Rent P3,500, Salaries P1,500

30 Inventory April 30, P25,000

General Journal 1

Date Accounts Title and Explanation PR Debit Credit

April 1 Cash 101 39,000
Lopez, Capital 301 39,000
To record initial investment

2 Computer equipment 104 10,000

cash 101 10,000

/ Purchases 501 15,900

Accounts payable 201 15,900

3 Office supplies 103 700

cash 101 700

4 Accounts receivable 102 15,200

sales 401 15,200

5 Freight out 601 200

cash 101 200

6 Accounts payable 201 300

Purchase returns and allowances 502 300

11 Accounts payable 201 15,600

Cash 101 15,288
Purchase discount 503 312

13 Cash 101 14,896

Sales Discount 402 304
Accounts receivable 102 15,200

14 Purchases 501 14,400

cash 101 14,400

15 Salaries expense 605 1.500

cash 101 1,500

16 Cash 101 12,000

Notes payable 202 12,000
General Journal 2

Date Accounts Title and Explanation PR Debit Credit

April 17 Cash 101 500
Purchase return and allowances 502 500

18 Purchases 501 14,200

Accounts payable 201 14,200

20 Freight in 504 700

Cash 101 700

23 Cash 101 16,400

Sales 401 16,400

26 Purchase 501 12,300

Cash 101 12,300

27 Accounts payable 201 9,000

cash 101 9,000

28 J. Lopez, Drawing 302 2,008

Cash 101 2,008

29 Sales return and allowances 403 900

cash 101 900

30 Accounts receivable 102 13,700

Sales 401 13,700

/ Advertising expense 602 1,000

Utilities expense 603 400
Rent expense 604 3,500
Salaries expense 605 1,500
cash 101 6,400
 Income summary 66,804
Purchases 56,800
Advertising expense 1,000
Utilities expense 400
Rent expense 3,500
Salaries expense 3,000
Freight Out 200
Freight in 700
Sales Discount 304
Sales Return and allowances 900
Merchandise Inventory 25,000

Merhandise Inventory 25,000

Purchase returns and allowances 800
Purchase discounts 312
Sales 45,300
Income summary 71,412

J.Lopez, Capital 2,008

J. Lopez Drawing 2,008

Income Summary 4,608

J.Lopez, Capital 4,608

101 Cash

Date Explanation PR Debit Credit Balance

Debit credit
1 GJ-1 39,000 39,000
2 GJ-1 10,000 29,000
3 GJ-1 700 28,300
5 GJ-1 200 28,100
11 GJ-1 15288 12,812
13 GJ-1 14,896 27,708
14 GJ-1 14,400 13,308
15 GJ-1 1,500 11,808
16 GJ-1 12,000 23,808
17 GJ-2 500 24,308
20 GJ-2 700 23,608
23 GJ-2 16,400 40,000
26 GJ-2 12,300 27,708
27 GJ-2 9,000 18,708
28 GJ-2 2,008 16,700
29 GJ-2 900 15,800
30 GJ-2 6,400 9,400
102 Accounts Receivable

Date Explanation PR Debit Credit Balance

debit credit
4 GJ-1 15,200 15200
13 GJ-1 15200 0
30 GJ-2 13700 13,700

103 Supplies

Date Explanation Debit Credit Balance

debit credit
3 700 700

104 Equipment

Date Explanation PR Debit Credit Balance

debit credit
2 GJ-1 10,000 10,000

201 Accounts Payable

Date Explanation Debit Credit Balance

debit credit
2 GJ-1 15,900 15,900
6 GJ-1 300 15,600
11 GJ-1 15,600 0
18 GJ-2 14,200 14,200
27 GJ-2 9,000 5,200

202 Notes Payable

Date Explanation PR Debit Credit Balance

debit credit
16 GJ-1 12,000 12,000
301 Lopez, Capital

Date Explanation PR Debit Credit Balance

debit credit
Apr1 GJ-1 39,000 39,000
30 GJ-2 2,008 36,992
4,608 41,600

302 Lopez, Drawing

Date Explanation PR Debit Credit Balance

debit credit
Apr28 GJ-2 2,008 2,008
30 GJ-2 2,008 0

401 Sales

Date Explanation PR Debit Credit Balance

debit credit
Apr4 GJ-1 15,200 15,200
22 GJ-2 16,400 31,600
30 GJ-2 13,700 45,300
30 GJ-2 45,300 0

402 Sales Discount

Date Explanation PR Debit Credit Balance

debit credit
Apr13 GJ-1 304 304
30 GJ-2 304 0

403 Sales Returns and Allowances

Date Explanation PR Debit Credit Balance

debit credit
Apr29 GJ-1 900 900
30 GJ-2 900 0
501 Purchases

Date Explanation PR Debit Credit Balance

debit credit
Apr2 GJ-1 15,900 15,900
14 GJ-1 14,400 30.300
18 GJ-2 14,200 44,500
26 GJ-2 12,300 56,800
30 GJ-2 56,800 0

502 Purchase Discounts

Date Explanation PR Debit Credit Balance

debit credit
Apr11 GJ-1 312 312
30 GJ-2 312 0

503 Purchase Returns and Allowances

Date Explanation PR Debit Credit Balance

debit credit
Apr6 GJ-1 300 300
17 GJ-2 500 800
30 GJ-2 800 0

504 Freight In

Date Explanation PR Debit Credit Balance

debit credit
Apr GJ-1 700 700

601 Freight Out

Date Explanation Debit Credit Balance

debit credit
Apr GJ-1 200 200
602 Advertising Expense

Date Explanation PR Debit Credit Balance

debit credit
Apr30 GJ-2 1,000 1,000
30 GJ-2 1,000 0

603 utilities Expense

Date Explanation Debit Credit Balance

debit credit
Apr30 GJ-2 400 400
30 GJ-2 400 0

603 Rent expense

Date Explanation Debit Credit Balance

debit credit
Apr30 GJ-2 3,500 3,500
30 GJ-2 3,500 0

604 Salaries Expense

Date Explanation PR Debit Credit Balance

debit credit
Apr15 GJ-1 1,500 1,500
30 GJ-2 1,500 3,000
30 GJ-2 3,000 0

______ Income Summary

Date Explanation Debit Credit Balance

debit credit
Apr30 GJ-2 71,412 71,412
GJ-2 66,804 4,608
GJ-2 4,608 0
 Dole Distributor
Trial Balance
April 30, 20xx

Acct. No. Accounts Title Debit Credit

101 Cash P 9,400
102 Accounts receivable 13,700
103 Supplies 700
104 Equipment 10,000
201 Accounts payable P 5,200
202 Notes payable 12,000
301 J.Lopez, Capital 39,000
302 J.Lopez, Drawing 2,008
401 Sales 45,300
402 Sales discount 900
403 Sales return and allowances 304
501 Purchases 56,800
502 Purchase returns and allowances 800
503 Purchase discount 312
504 Freight In 700
601 Freight out 200
602 Advertising expense 1,000
603 Utilities expense 400
604 Rent expense 3,500
605 Salaries expense 3,000

Balance: P 102,612 P102,612

 Dole Distributor
Cost of Goods Sold
April 30, 20xx

Inventory beginning 0
Add: purchases 56,800
Less: purchase return and allowances 800
Purchase discount 312 (1,112)
Total 55,688
Add: Expenses
Freight in 700
Cost of Goods Available for Sale 56,388
Less: Inventory Ending 25,000
COST OF GOOD SOLD 31,388

Dole Distributor
Statement of Financial Performance
April 30, 20xx

Sales 45,300
Less: sales return and allowances 900
Sales discount 304 (1,204)
Net sales 44,096
Less: cost of goods sold (31,388)
Gross Profit 12,708
Less Expenses
Rent expense 3,500
Utilities expense 400
Salaries expense 3,000
Advertising expense 400
Freight Out 200 (8,100)
Net Income 4,608
 Dole Distributor
Statement of Changes in Equity
April 30, 20xx

J. Lopez Capital, Beginning 39,000

Add: net income 4,608
Total 43,608
Less: J.Lopez Drawiing (2,008)
J.Lopez Capital, ending 41,600

Dole Distributor
Statement of Financial Position
April 30, 20xx

ASSETS
Cash 9,400
Accounts receivable 13,700
Merchandise Inventory 25,000
Supplies 700
Equipment 10,000
TOTAL ASSETS 58,800

LIABILITIES
Accounts payable 5,200
Notes payable 12,000

EQUITY
J.Lopez, Capital 41,600
TOTAL LIABILITIES AND EQUITY 58,800
 Dole Distributor
Statement of Cash Flow
April 30, 20xx

Cash Flow from operating activities

Payment for supplies (700)
Payment for freight out (200)
Payment for creditors (15,288)
receive from customer account 14,896
Payment for merchandise purchased (14,400)
Payment for salaries (1,500)
Payment for freight in (700)
Payment for Merchandise purchased (12,300)
Payment for creditor (9000)
Cash received from purchase return 500
Cash received from merchandise sold 16,400
Payment for Cash refund to customer (900)
Payment of various expenses (6,400)
NET CASH PROVIDED BY OPERATING ACTIVITIES (29,592)

Cash Flow from investing activities

Cash payment of Equipment (10,000)
Cash load from bank 12,000
NET CASH PROVIDED BY INVESTING ACTIVITIES 2,000

Cash Flow from financing activities

Cash investment of owner 39,000
Payment for owner’s withdrawal 2,008
NET CASH PROVIDED BY FINANCING ACTIVITIES 36,992

TOTAL CASH P 9,400

 Dole Distributor
Post-closing Trial Balance
April 30, 20xx

Acct. No. Accounts Title Debit Credit

101 Cash P 9,400
102 Accounts receivable 13,700
103 Supplies 700
104 Equipment 10,000
105 Merchandise Inventory 25,000
201 Accounts payable P 5,200
202 Notes payable 12,000
301 J.Lopez, Capital 41,600

BALANCE P 58, 800 P 58,800