Problem
On July 1, 2021, Maria initially invested P200,000 cash into Maria Merchandising. On the same date, she paid P45,000 for six months' rent on the store space, P10,000 for business licenses and permits, and P50,000 for various store furniture.
She also bought P60,000 worth of office supplies on account with the intention to sell them at a higher price.
However, the next day, the business received a P1,500 credit memo for allowance granted on the purchased merchandise.
The supplies were bought from 123 Supplies Store on terms m/60. On June 6, the business bought from 45 Supplies Shop P5,000 worth of supplies to be used in the store on terms 50% downpayment, balance n/30.
Francisco, a part time employee, was able to sell on July 12 some of the store's merchandise to Mr. Y for P16,000 on terms 50% downpayment, balance 2/10, n/30.
On July 24, the business sold to Mrs. Z merchandise for P12,000 on terms 2/10, n/30. On July 30, Ms. X paid the business P42,000 for merchandise bought on the same day. Although Ms. X already paid for all the merchandise in full, she requested that some merchandise be delivered to her new business address sometime next month.
At the end of the month, the business paid utilities totalling P4,920 and miscellaneous expenses amounting to P2,710.
Adjustments data are as follows:
• Merchandise inventory as of July 31, 2021 is P8,500, based on physical count.
• The P5,000 salary of Francisco for the month of July remains unpaid as of July 31, 2021
• Store supplies unused as of July 31, 2021 is P1,800, based on physical count.
• The P45,000 rental payment is applicable for the months of July to December 2021.
• The July 30 sale to Ms. X included P15,000 worth of merchandise to be delivered in August.
• The store furniture has an estimated salvage value of P5,000 and useful life of 10 years.
• Doubtful accounts are estimated at 12% of outstanding customer accounts
Task
A. Prepare the adjusting entries and closing entries.
B. Compute the Cost of Goods Sold
C. Compute the Inventory shortage or Overage if there's any.