MERCHANDISE INVENTORY

Assume the following: Account DR CR

Merchandise Invty - Start 50,000 Opening Entry
Purchases 100,000 Purchases 100,000
Merchandise Invty - End 30,000 Cash 100,000
Merchandise Inventory 30,000
Income Summary 30,000

ALLOWANCE FOR DOUBTFUL ACCOUNTS

DR CR % OF GROSS SALES
Accounts Receivable 300,000 Account DR CR
Allowance for Doubtful Accounts 7,500 1% of Sales
Sales 500,000 Bad Debts Expense 5,000
Sales Returns and Allowances 15,000 Allowance for Doubtful Accounts 5,000
Sales Discount 9,000
% OF NET SALES
1% of Sales
Bad Debts Expense 4,760
Allowance for Doubtful Accounts 4,760

% OF ACCOUNTS RECEIVABLE - BY
3% of Accounts Receivable
Bad Debts Expense 9,000
Allowance for Doubtful Accounts 9,000

% OF ACCOUNTS RECEIVABLE - TO
3% of Accounts Receivable
Bad Debts Expense 1,500
Allowance for Doubtful Accounts 1,500

10K Beginning Allowance % AGING OF ACCOUNTS RECEIVABLE

Outstanding % Amount Outstanding Allowance
Current 0% 90,000 Current -
1-30 days 2% 80,000 1-30 days 1,600
31 to 60 days 5% 70,000 31 to 60 days 3,500
61 to 90 days 10% 30,000 61 to 90 days 3,000
91 to 180 days 40% 20,000 91 to 180 days 8,000
181 to 360 days 50% 10,000 181 to 360 days 5,000
Total 300,000 Total 21,100

Bad Debts Expense 11,100

Allowance for Doubtful Accounts 11,100
COGS Computation:
Merchandise Invty, Beg. 50,000
Add: Purchases 100,000
Total Goods Available for Sale 150,000
Less: Merch. Invty. End 30,000
Cost of Sales 120,000

Allowance for Doubtful Accounts

Beg. Balance 7,500
Additional Provision 5,000
End. Balance 12,500

Allowance for Doubtful Accounts

Beg. Balance 7,500
Additional Provision 4,760
End. Balance 12,260

Allowance for Doubtful Accounts AR - NET

Beg. Balance 7,500
Additional Provision 9,000
End. Balance 16,500

Allowance for Doubtful Accounts AR - GROSS

End Bal.. Allowance for DA 9,000
Less: Beg 7,500
Provision for Bad Debts 1,500

Allowance for Doubtful Accounts

End Bal.. Allowance for DA 21,100
Less: Beg 10,000
Provision for Bad Debts 11,100
 REGAL SALES COMPANY
CHART OF ACCOUNTS
AS OF DECEMBER 31, 2022

No. Account Title

101 Cash
102 Accounts Receivable
103 Allowance for Doubtful accounts
104 Notes Receivable
105 Interest Receivable
106 Merchandise Inventory
107 Unused Supplies
108 Prepaid Advertising Expense
201 Furniture & Fixtures
202 Accumulated Depreciation - Furniture & Fixtures
203 Office Equipment
204 Accumulated Depreciation - Office Equipment
301 Accounts Payable
302 Notes Payable
303 Salaries Payable
304 Rent Payable
305 Taxes Payable
306 Interest Payable
307 Withholding Taxes Payable
308 SS Premiums Payable
309 Philhealth Premiums Payable
310 Unearned Rent Income
401 Cases, Capital
402 Cases, Drawings
403 Income & Expense Summary
501 Sales
502 Sales Return & Allowances
503 Sales Discount
601 Purchases
602 Freight In
603 Purchase Returns & Allowances
604 Purchase Discount
605 Freight Out
606 Salaries Expense
607 Advertising Expense
608 Utilities Expense
609 Rent Expense
610 Supplies Expense
611 Doubtful Accounts Expense
612 Depreciation Expense - Furniture & Fixtures
613 Depreciation Expense - Office Equipment

701 Rent Income

801 Interest Expense
 REGAL SALES COMPANY
TRIAL BALANCE
AS OF DECEMBER 31, 2022

Account Debit Cedit

Cash 50,575
Accounts Receivable 18,500
Allowance for Doubtful accounts 1,200
Merchandise Inventory 27,250
Unused Supplies 750
Furniture & Fixtures 27,000
Accumulated Depreciation - Furniture & Fixtures 2,700
Office Equipment 15,000
Accumulated Depreciation - Office Equipment 1,900
Notes Payable 20,000
Accounts Payable 5,770
Withholding Taxes Payable 875
SS Premiums Payable 525
Philhealth Premiums Payable 350
Cases, Capital 117,010
Cases, Drawings 1,000
Sales 120,500
Sales Returns & Allowances 2,500
Sales Discount 1,500
Purchases 75,145
Freight In 1,890
Purchase Returns and Allowances 475
Purchase Discount 305
Advertising Expense 3,000
Freight Out 2,900
Rent Expense 20,000
Salaries Expense 17,500
Taxes Expense 2,000
Utilities Expense 6,600
Rent Income 1,500
TOTALS 273,110 273,110
Additional information on December 31, 2022 follows:
1. Allowance for doubtful should be increased to 10% of the accounts receivable.

2. Supplies on hand. P250. (Asset method).

3. Furniture and fixtures were acquired January 1, 2021 with an estimated useful life
of ten years, mo scrap value.

4. Office equipment consist of:

P 10,000 acquired January 1, 2021, estimated useful life of five years, P500 scrap value.
P 5,000 acquired July 1, 2022. estimated useful life of five years, no scrap value.

5. Notes payable is for 30 days. 6% dated December 10, 2022.

6. Unpaid salaries amounted to P2,500.

7. Advertising was paid on December 1, 2022 to Malaya Journal for six consecutive
Sundays starting December 2 (Expense Method) - 5 Sundays at Dec 31

8. Accrue 3% percentage tax on December net sales of P10,000

9. A lessee who is a food and drunk stall owner occupying a corner of the store gave an
advance rental for four months amounting to P1,500 on October 1. (Income Method)

10. Merchandise Inventory changed to P47,755 on December 31, 2022.

 F
ACCOUNT
Account Debit Credit
Bad Debts Expense 650 Cash
Allowance for Doubtful Accounts 650 Accounts Receivable
Allowance for Doubtful accounts
Supplies Expense 500 Merchandise Inventory
Unused Supplies 500 Unused Supplies
Furniture & Fixtures
Depreciation Expense - Furni 2,700 Accumulated Depreciation - Furniture & Fixtures
Accumulated Depreciation - Furniture & Fix 2,700 Office Equipment
Accumulated Depreciation - Office Equipment
Notes Payable
Depreciation Expense - Offi 2,400 Accounts Payable
Accumulated Depreciation - Office Equipm 2,400 Withholding Taxes Payable
SS Premiums Payable
Interest Expense 70 Philhealth Premiums Payable
Interest Payable 70 Cases, Capital
Cases, Drawings
Salaries Expense 2,500 Sales
Salaries Payable 2,500 Sales Returns & Allowances
Sales Discount
Prepaid Advertising Expense 500 Purchases
Advertising Expense 500 Freight In
Purchase Returns and Allowances
Taxes Expense 300 Purchase Discount
Taxes Payable 300 Advertising Expense
Freight Out
Rent Income 375 Rent Expense
Unearned Rent Income 375 Salaries Expense
Taxes Expense
Merchandise Inventory 47,755 Utilities Expense
Income & Expense Summary 47,755 Rent Income

Bad Debts Expense

Supplies Expense
Depreciation Expense - Furniture & Fixtures
Depreciation Expense - Office Equipment
Interest Expense
Interest Payable
Salaries Payable
Prepaid Advertising Expense
Taxes Payable
Unearned Rent Income
Merchandise Inventory
Income & Expense Summary

*Store space 80% for Sales and 20% for admin

*Salaries - 15K for sales dept
*F&F is for sales dept
*Store supplies 375 for sales dept
 REGAL SALES COMPANY
WORKSHEET
FOR THE YEAR ENDED DECEMBER 31, 2022
UNADJUSTED TB ADJUSTMENTS ADJUSTED TB INCOME STATEMENT BALANCE SHEET
DR CR Ref DR CR DR CR DR CR DR
50,575 - 50,575 50,575
18,500 - 18,500 18,500
- 1,200 1 650 1,850
27,250 - 27,250 27,250
750 - 2 500 250 250
27,000 - 27,000 27,000
- 2,700 3 2,700 5,400
15,000 - 15,000 15,000
- 1,900 4 2,400 4,300
- 20,000 20,000
- 5,770 5,770
- 875 875
- 525 525
- 350 350
- 117,010 117,010
1,000 - 1,000 1,000
- 120,500 120,500 120,500
2,500 - 2,500 2,500
1,500 - 1,500 1,500
75,145 - 75,145 75,145
1,890 - 1,890 1,890
- 475 475 475
- 305 305 305
3,000 - 7 500 2,500 2,500
2,900 - 2,900 2,900
20,000 - 20,000 20,000
17,500 - 6 2,500 20,000 20,000
2,000 - 8 300 2,300 2,300
6,600 - 6,600 6,600
- 1,500 9 375 1,125 1,125
273,110 273,110
1 650 650 650
2 500 500 500
3 2,700 2,700 2,700
4 2,400 2,400 2,400
5 70 70 70
5 70 70
6 2,500 2,500
7 500 500 500
 8 300 300
9 375 375
10 47,755 47,755 47,755
10 47,755 47,755 47,755
57,750 57,750 329,485 329,485 168,905 170,160 160,580
1,255
170,160 170,160 160,580
 REGAL SALES COMPANY REGAL SALES COMPANY
INCOME STATEMENT STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2022 FOR THE YEAR ENDED DECEMBER 31, 2022
BALANCE SHEET
CR
Net Sales Note 1 116,500 Cases, Capital Beg.
Cost of Sales Note 2 55,750 Add: Net Income
1,850 Gross Income 60,750 Total
Rent Income 1,125 Less: Drawing
Distribution Expenses Note 3 - 42,070 Cases, Capital End.
Administrative Expenses Note 4 - 18,480
5,400 Operating Income 1,325
- Interest Expense 70
4,300 NET INCOME 1,255
20,000
5,770 NOTE 1: NET SALES
875 Sales 120,500
525 Sales Returns & Allowances - 2,500
350 Sales Discount - 1,500
117,010 NET SALES 116,500

NOTE 2: COST OF SALES

MI, Beg 27,250
Add: Purchases 75,145
Add: Freight In 1,890
Less: PD - 305
Less: PR&A - 475
Total Goods Available for Sale 103,505
Less: MI End - 47,755
COST OF SALES 55,750
NOTE 3: DISTRIBUTION EXPENSES
Salaries Expense 15,000
Store Utilities 4,620
Advertising Expense 2,500
Freight Out 2,900
Rent Expense 14,000
Depreciation Expense - Furniture & Fix 2,700
Supplies 350
TOTALS 42,070

NOTE 4: ADMINISTRATIVE EXPENSES

70 Rent Expense 6,000
2,500 Salaries Expense 5,000
Taxes Expense 2,300
 300 Utilities Expense 1,980
375 Bad Debts Expense 650
Supplies Expense 150
Depreciation Expense - Office Equipme 2,400
159,325 TOTALS 18,480
1,255
160,580
 COMPANY REGAL SALES COMPANY
ANGES IN EQUITY STATEMENT OF FINANCIAL POSITION
DECEMBER 31, 2022 AS OF DECEMBER 31, 2022 CLOSING ENTRIES

ASSETS
117,010 Current Assets Income and Expense Summary
1,255 Cash 50,575 Merchandise Inventory
118,265 Accounts Receivable 18,500 Sales Returns & Allowances
1,000 Allowance for Doubtful accounts - 1,850 Sales Discount
117,265 Merchandise Inventory 47,755 Purchases
Prepaid Expenses Note 1 750 Freight In
Total Current Assets 115,730 Advertising Expense
Freight Out
Noncurrent Assets Rent Expense
Property and Equipment Note 2 32,300 Salaries Expense
TOTAL ASSETS 148,030 Taxes Expense
Utilities Expense
LIABILITIES AND EQUITY Bad Debts Expense
Current Liabilities Supplies Expense
Trade and Other Payables Note 3 30,765 Depreciation Expense - Furniture & Fixtures
Owner's Equity Depreciation Expense - Office Equipment
Owner's Capital 117,265 Interest Expense
TOTAL LIABILITIES AND EQUITY 148,030 To close all debit balances

NOTE 1: PREPAID EXPENSES Sales

Unused Supplies 250 Purchase Returns and Allowances
Prepaid Advertising Expense 500 Purchase Discount
TOTAL 750 Rent Income
Income and Expense Summary
NOTE 2: PROPERTY AND EQUIPMENT To close all credit balances
Furniture & Fixtures 27,000
Accumulated Depreciation - Furniture & Fixtu - 5,400 Cases, Capital
Office Equipment 15,000 Cases, Drawings
Accumulated Depreciation - Office Equipment - 4,300 To close drawing account
TOTAL 32,300
Income and Expense Summary
NOTE 2: TRADE AND OTHER PAYABLES Cases, Capital
Notes Payable 20,000 To close net iincome to capital
Accounts Payable 5,770
Withholding Taxes Payable 875
SS Premiums Payable 525
Philhealth Premiums Payable 350
Interest Payable 70
Salaries Payable 2,500
Unearned Rent Income 375
Taxes Payable 300
TOTAL 30,765
 POST CLOSING TRIAL BALANCE
STATEMENT OF FINANCIAL POSITION
AS OF DECEMBER 31, 2022

168,905 Cash 50,575

27,250 Accounts Receivable 18,500
2,500 Allowance for Doubtful accounts
1,500 Merchandise Inventory 47,755
75,145 Unused Supplies 250
1,890 Furniture & Fixtures 27,000
2,500 Accumulated Depreciation - Furniture & Fixtures
2,900 Office Equipment 15,000
20,000 Accumulated Depreciation - Office Equipment
20,000 Notes Payable
2,300 Accounts Payable
6,600 Withholding Taxes Payable
650 SS Premiums Payable
500 Philhealth Premiums Payable
se - Furniture & Fixtures 2,700 Cases, Capital
se - Office Equipment 2,400 Interest Payable
70 Salaries Payable
Prepaid Advertising Expense 500
Taxes Payable
120,500 Unearned Rent Income
d Allowances 475 TOTAL 159,580
305
1,125
122,405

1,000
1,000

1,255
1,255
me to capital
CE
TION
OPENING ENTRY:
ACCOUNT DR CR

Cash 50,575
Accounts Receivable 18,500
1,850 Merchandise Inventory 47,755
Unused Supplies 250
Furniture & Fixtures 27,000
Office Equipment 15,000
5,400 Prepaid Advertising Expense 500
Allowance for Doubtful accounts 1,850
4,300 Accumulated Depreciation - Furniture & Fixtures 5,400
20,000 Accumulated Depreciation - Office Equipment 4,300
5,770 Notes Payable 20,000
875 Accounts Payable 5,770
525 Withholding Taxes Payable 875
350 SS Premiums Payable 525
117,265 Philhealth Premiums Payable 350
70 Cases, Capital 117,265
2,500 Interest Payable 70
Salaries Payable 2,500
300 Taxes Payable 300
375 Unearned Rent Income 375
159,580
REVERSING ENTRIES:
ACCOUNT DR CR

Advertising Expense 500

Prepaid Advertising Expense 500

Unearned Rent Income 375

Rent Income 375
GENERIKA DRUGSTORE
STATEMENT OF FINANCIAL POSITION HORIZONTAL ANALYSIS VERTICAL ANALYSIS
AS OF DECEMBER 31, 2022 AND 2021
2022 2021 Amount % 2022
Cash 120,000 130,000 - 10,000 -7.69% 26.97%
Receivables (net) 65,000 60,000 5,000 8.33% 14.61%
Inventories 60,000 50,000 10,000 20.00% 13.48%
Plant Assets (net) 200,000 180,000 20,000 11.11% 44.94%
Total Assets 445,000 420,000 25,000 5.95% 100.00%

Accounts Payable 50,000 60,000 - 10,000 -16.67% 11.24%

Mortgage Payable 195,000 220,000 - 25,000 -11.36% 43.82%
Generika, Capital 200,000 140,000 60,000 42.86% 44.94%
Total Liabilities and Equity 445,000 420,000 25,000 5.95% 100.00%

GENERIKA DRUGSTORE
INCOME STATEMENT
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
2022 2021
Sales 550,000 420,000 130,000 30.95% 100.00%
Sales Returns and Allowances 30,000 20,000 10,000 50.00% 5.45%
Net Sales 520,000 400,000 120,000 30.00% 94.55%
Cost of Sales 260,000 190,000 70,000 36.84% 47.27%
Gross Income 260,000 210,000 50,000 23.81% 47.27%
Operating Expenses 142,100 106,200 35,900 33.80% 25.84%
Operating Income 117,900 103,800 14,100 13.58% 21.44%
Interest Expense 46,000 38,750 7,250 18.71% 8.36%
NET INCOME 71,900 65,050 6,850 10.53% 13.07%
VERTICAL ANALYSIS FINANCIAL RATIOS

2021 PROFITABILITY 2022 2021

30.95% Gross Profit Ratio 50.00% 52.50%
14.29% Operating Profit Raio 22.67% 25.95%
11.90% Return on Sales 13.83% 16.26%
42.86% Return on Assets 16.62% 15.49%
100.00% Return on Equity 42.29% 46.46%

14.29% LIQUIDITY
52.38% Working Capital 195,000 180,000
33.33% Current Ratio 4.90 4.00
100.00% Acid Test Ratio 3.70 3.17

TURNOVER RATIOS
Receivable Turnover 8.32 6.67 times
Collection Period 44 55 days
Average Receivables 62,500 60,000
100.00%
4.76%
95.24% Inventory Turnover 4.73 3.80 times
45.24% Holding Period 77 96 days
50.00% Average Inventory 55,000 50,000
25.29%
24.71% Asset Turnover 1.20 0.95
9.23% Average Asset 432,500 420,000
15.49%
SOLVENCY
Debt Ratio 55.06% 66.67%
Equity Raio 44.94% 33.33%
Times-Interest Earned 256.30% 267.87% Opex/Int Expense

LEVERAGE
Leverage Ratio 2.54 3.00 Assets/Equity
DU PONT Analysis

ROE 42.29%