Question

problem 3: exercises

1. joca co. purchased goods with an invoice price of ₱100,000 on account from nap co. on dec. 27, 20x1. nap shipped the goods on dec. 31, 20x1 and joca received the shipment on jan. 2, 20x2. the related shipping costs were ₱10,000. joca settled the account on jan. 5, 20x2.
2. worried co. had the following transactions during the period:

a) purchased goods worth ₱50,000 on account. freight of ₱4,000 was paid on the shipment.
b) returned damaged goods, costing ₱5,000, to the supplier.
c) sold goods costing ₱30,000 for ₱90,000 on account.
d) received goods with sale price of ₱6,000 and cost of ₱2,000 from a customer.
requirements: using the periodic inventory system, provide the entries in joca’s books under each of the following sale terms: (a) fob shipping point, freight collect; (b) fob destination, freight prepaid; (c) fob shipping point, freight prepaid; and (d) fob destination, freight collect
requirement: prepare the journal entries under (a) perpetual inventory system and (b) periodic inventory system.

Explanation:

Step1: Record purchase

In a periodic inventory system, when goods are purchased on account, we debit Purchases and credit Accounts Payable.
Debit: Purchases $50,000
Credit: Accounts Payable $50,000

Step2: Record freight - paid on shipment

Freight - in is an expense in a periodic system related to getting the goods to the business.
Debit: Freight - in $4,000
Credit: Cash $4,000

Step3: Record return of damaged goods

When goods are returned to the supplier, we debit Accounts Payable and credit Purchases Returns and Allowances.
Debit: Accounts Payable $5,000
Credit: Purchases Returns and Allowances $5,000

Step4: Record sale of goods

When goods are sold on account, we record the sale amount.
Debit: Accounts Receivable $90,000
Credit: Sales $90,000

Step5: Record cost of goods sold

We record the cost of the goods that were sold.
Debit: Cost of Goods Sold $30,000
Credit: Inventory $30,000

Step6: Record return of goods from customer

When goods are returned by the customer, we debit Sales Returns and Allowances and credit Accounts Receivable. Also, we debit Inventory and credit Cost of Goods Sold for the cost of the returned goods.
Debit: Sales Returns and Allowances $6,000
Credit: Accounts Receivable $6,000
Debit: Inventory $2,000
Credit: Cost of Goods Sold $2,000

Answer:

The journal entries for each transaction are as follows:

1. Purchase of goods on account:

Debit: Purchases $50,000
Credit: Accounts Payable $50,000

1. Freight - paid on shipment:

Debit: Freight - in $4,000
Credit: Cash $4,000

1. Return of damaged goods to supplier:

Debit: Accounts Payable $5,000
Credit: Purchases Returns and Allowances $5,000

1. Sale of goods on account:

Debit: Accounts Receivable $90,000
Credit: Sales $90,000

1. Cost of goods sold for the sale:

Debit: Cost of Goods Sold $30,000
Credit: Inventory $30,000

1. Return of goods from customer:

Debit: Sales Returns and Allowances $6,000
Credit: Accounts Receivable $6,000
Debit: Inventory $2,000
Credit: Cost of Goods Sold $2,000