REVIEWER: FABM
In addition to the problem above, Malia sold goods on Feb
15, 2018 worth 200,000, 10%,10%,5%, 3/10, 2/EOM, n/30.
FOB Destination, freight prepaid of 2,000. Ana, the
customer returned goods worth 3,900 and a full payment on
Feb 28. Assuming that the operating expenses is 25,000.
How much is the net sales, gross profit, net income, and the
amount to be received by Malia on Feb 28.
Solution:
I. Net Purchases, TGAS, and Cost of Sale
Beginning Inventory
Add: Net Purchases*
TGAS
Less: Ending Inventory
Cost of Sales/COGS
XX
XX
XX
(XX)
XX
Purchases (net of trade discount)
Purchases Discount
Purchase Return & Allowances
Freight-in
Net Purchases
XX
(XX)
(XX)
XX
XX
Sample Problem:
Malia bought merchandise worth 40,000 on January 1,
2018 with 10%;10%, 10/10, n/30. Worth 2,400 goods were
returned. Purchase discount was availed. Freight cost is
3,000. Beginning inventory is 25,000 while ending
inventory is 15,000. How much is the net purchases, TGAS
and COGS?
Solution:
Beginning Inventory
Add: Net Purchases*
TGAS
Less: Ending Inventory
Cost of Sales/COGS
25,000
30,000
55,000
(15,000)
40,000
Purchases ((40,000*90%*90%)
Purchases Discount(32,400-2400)*10%
Purchase Return & Allowances
Freight-in
Net Purchases
Journal entry:
Purchases
32,400
Freight-in
3,000
Accounts payable
Cash
32,400
(3,000)
(2,400)
3,000
30,000
147,000
(40,000)
107,000
(25,000)
82,000
Sales (200,000*90%*90%*95%)
Sales Discount(153,900-3,900)*2%
Sales Return & Allowances
Net Sales/Amount to be received as well
153,900
(3,000)
(3,900)
147,000
***Assuming that the above problem includes a down
payment of 20,000 on February 15, 2018 the amount to be
received by Malia will no longer 147,000 but instead,
127,000.
REMINDERS:
1. Discounts shall only be given upon full payment
unless otherwise there is a policy that even in
partial payments, purchase discount shall be
allowed.
2. Failure to include ending inventory in the financial
statements results to overstatement of cost of sale
and understatement of inventory.
III. Interest
Interest = Principal * rate * time
Example: Notes Receivable of 100,000 is for 90 days at
15% dated December 1, 2018. How much is the accrued
interest on December 31, 2018?
32,400
2,000
I = 100,000*15%*30/360
I = 1,250
II. Net Sales, Gross Profit, Net Income
Net Sales (net of trade discount)
Cost of Sales
Gross Profit
Operating Expenses
Operating Income/Net Income
Net Sales
Cost of Sales
Gross Profit
Operating Expenses
Operating Income/Net Income
XX
(XX)
XX
(XX)
XX
Entry:
Interest receivable
1,250
Interest Income
1,250
If such is a note payable, then the entry should be,
Interest expense
1,250
Interest payable
1,250
_Good luck and God bless_
_ATA_