Reference no: EM132241137

Problem 1 - Flow of an accounting for the merchandiser

High Plains Sales Corporation experienced the following events during the current year:

1. Incurred marketing costs of P197,000.

2. Purchased P971,000 of merchandise.

3. Paid P26,000 for transportation-in costs.

4. Incurred P400,000 of administrative costs.

5. Took a periodic inventory on December 31 and learned that goods with a cost of P297,000 were on hand. This compared with a beginning inventory of P314,000 on January 1.

6. Sales revenue during the year was P1,850,000.

All costs incurred were debited to the appropriate account and credited to Accounts Payable. All sales were on credit.

Required -

1. Prepare journal entries to reflect these events.

2. Prepare T- accounts to show these events.

3. Prepare an income statement based on these data.

Problem 2 - Cost Flows in a service organization

For the month of March CBL Consulting Group worked 400 hours for Dynasty Manufacturing, 100 hours for Golden Manufacturing and 200 hours for Commissions, Inc. CBL bills clients at the rate of P 100 per hour, while labor cost is P 40 per hour. A total of 800 hours were worked in March, with 100 hours not billable to clients. Overhead costs of P12,000 were assigned to jobs (that is, clients) on the basis of direct labor-hours. Since 100 hours were not billable, some overhead was not assigned to jobs. CBL had P6,000 marketing and administrative costs. All transactions are on account.

Required -

a. Show the flow of cost through T- accounts.

b. Prepare an income statement for CCG for the month ended March 31.

c. Prepare journal entries.