SAMPLE PROBLEM

The beginning inventory of Beta company consisted of 100 units @ P60 each. The following transactions
occurred during the month of March 2013.
 Mar. 05: Purchased 300 units @ P60 each.
 Mar. 06: Out of 300 units purchased on March 05, 10 units were returned to supplier.
 Mar: 28: Sold 250 units @ P100 each.
On March 31, 2013, 140 units were found by a physical count.
Required: Make journal entries for the month of June assuming the Beta company uses:
1. perpetual inventory system.
2. periodic inventory system.
Solution:
(1) If perpetual inventory system is used:
March, 05 – entry to record purchase of 300 units on account:

*(300 units × P60) = P18,000

March, 06 – entry to record return of 10 units to supplier:

*(10 units × P60) = P18,000

March, 28 – entries to record sale of 250 units to customers:

a. Entry to realize sales revenue:

*(250 units × P100) = P25,000

b. Entry to update inventory account:

*(250 units × P60) = P15,000

(2). If periodic inventory system is used:
March, 05 – entry to record purchase of 300 units on account:

March, 06 – entry to record return of 10 units to supplier:

March, 28 – entry to record sale of 250 units to customers:

March, 31 – closing entry to create cost of goods sold account and to update inventory
account :

*140 × P60 = 8,400

SEATWORK (1 whole sheet of paper)

The Pharma company is a single product company. The company presents the following information
regarding its activities during the month of December 2013.
 Dec. 01: Beginning inventory; 200 units @ P10 each.
 Dec. 02: Sold 160 units @ P16 each.
 Dec. 12: Purchased 300 units @ P12 each.
 Dec. 18: Sold 240 units @ P17.50 each.
 Dec. 22: Purchased 320 units @ P14 each.
 Dec. 29: Sold 200 units @ P18 each.
At the end of December, there were 220 units on hand according to a physical count of inventory.
Pharma company uses a first-in, first-out (FIFO) cost flow assumption. All purchases and sales are made
on account.
Required:
1. Prepare journal entries and compute gross profit assuming the company uses a periodic
inventory system.
2. Prepare journal entries and compute gross profit assuming the company uses a perpetual
inventory system.