Question

Peter Senen Corporation provided the following account balances as of September 30, 2019:

Cash                                  P112,000

Accumulated depreciation     P 36,000

Accounts Receivable                    64,000

Accounts payable               40,000

Finished Goods                             48,000

Income tax payable                      9,000

Work in process                                 36,000    

Share Capital                          500,000    

Raw materials                            52,000    

Retained Earnings           207,000

Property and Equipment               480,000

The following transactions occurred during October:

1. Materials purchased on account,       P150,000

a. Journal entries: Ref. Account titles and explanation Debit Credit 1 Raw materials 150000 Accounts payable 150000

2. Materials issued to production: direct materials- P90,000, Indirect materials- P10,000.

3. Payroll for the month of October 2019 consisted of the following (also paid during the month):

         Direct labor     P62,000            Administrative salaries         P16,000

         Indirect Labor    20,000

         Sales salaries      30,000

Payroll deductions were as follows:

         Withholding taxes P19,800   Phil health contributions         P2,000

         SSS contributions         7,100   HDMF contributions                2,000

4. Employer contributions for the month were accrued:

                                  Factory             Selling               Administrative

SSS contributions    P5,700              P2,000              P1,100

Philhealth Contributions         1,200            500                    300

EC Contributions             400                       300                    200

HDMF contributions     1,600               700                      400

5. Other costs incurred on account:

         Indirect factory overhead- P42,000

         Selling                          -   30,000

         Administrative                    -   10,000

6. Depreciation for the month:

         Factory overhead-      P2,000

         Selling                               1,000

         Administrative                         1,000

7. Factory overhead control account was transferred to work in process, P82,900.

8. Work finished and placed in stock, P178,000

9. Cost of goods sold, P200,000. The markup was 60% of cost.

10. Cash collected from customers, P260,000

11. Materials returned to supplies, P15,000.

12. Payment of accounts payable, P190,000.

13. Provision for income tax, P6,000.

Required: a. Journals entries to record the above transactions

             b. Statement of cost of goods manufactured

             c. Income statement

             d. Balance sheet as of October 31, 2019

Answer 1

a)Journal

1	Rawmaterials Account Dr.	150000
	To Accounts payable		150000
2	Trading Account Dr	100000
	To Manufacturing account		100000
3	Wages Account Dr.	128000
	To Cash		128000
4	Statutory deductions Account Dr.	36500
	To Tax authorities		36500
5	Indirect factory overheads Account Dr.	42000
	Selling overheads Account Dr.	30000
	Administrative overheads Account Dr.	10000
	To Accounts payable		82000
6	Income statement Dr.	4000
	To Provision for depreciation		4000
7	Factory overhead control account Dr.	82900
	To Work in progress		82900
8	Stock Acc Dr.	178000
	To Trading Account		178000
10	Cash Acc Dr.	260000
	To Accounts receivable		260000
11	Accounts payable Acc Dr.	15000
	To Return outwards		15000
12	Accounts payable Acc Dr.	190000
	To Cash		190000
13	Income statement Dr.	6000
	To Provision for taxation		6000

b)

Statement of cost of goods manufactured
Materials consumed	90000
Direct labour (62000+5700+1200+5700+400+1600)	76600
Prime cost		166600
Add Factory overheads
Indirect materials	10000
Indirect labour	20000
Indirect factory overheads	42000
Depreciation	2000	74000
Factory costs		240600
Add opening inventory of work in progress		36000
Less closing inventory of work in progress		82900
Cost of production		193700

c)

Income statement
Sales (200000+120000)		320000
Less cost of goods sold		200000
Gross profit (200000 x 60%)		120000
Less expenses
Administration salaries	18000
Sales salaries	33500
Selling costs	30000
Administrative costs	10000
Selling Depreciation	1000
Administration depreciation	1000	93500
Profit before tax		26500
Taxaton provision		6000
Profit after tax		20500

d)

Balance sheet
Non-current assets	Cost	Acc Depreciation	NBV
Property and Equipment	480000	40000	440000
Current Assets
Stock of Raw materials	87000
Stock of work in progress	82900
Stock of Finished goods	178000	347900
Cash		54000
Accounts receivable		124000	525900
Total Assets			965900
Equity and liabilities
Equity
Share capital		500000
Retained earnings		227500	727500
Current liabilities
Accounts payable (40000+150000+82000-190000-15000)	67000
Statutory deductions		36500
Tax payable		15000	118500
			846000