question archive Paul Company is a wholesale distributor of automotive replacement parts
Paul Company is a wholesale distributor of automotive replacement parts
Subject:AccountingPrice: Bought3
Paul Company is a wholesale distributor of automotive replacement parts. Initial amounts taken
from Paul's accounting records are as follows:
Inventory at December 31,2009 (based on physical count of goods in Paul's
warehouse on December 31, 2009) P2,500,000
Sales in 2009 18,000,000
Accounts Payable at December 31, 2009
Vendor Terms Amount
A Company 2% , 10 days, net 30 P530,000
B Company net 30 420,000
C Company net 30 600,000
D Company net 30 450,000
E Company net 30 -
F Company net 30 -
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P2,000,000
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Additional information is as follows:
1. Parts held on consignment from B Company to Paul, the consignee, amounting to
P310,000, were included in the physical count of goods in Paul's warehouse on
December 31, 2009 and in accounts payable at December 31, 2009.
2. P44,000 parts which were purchased from E Company and paid for in December 2009
were sold in the last week of 2009 and appropriately recorded as sales in of P56,000. The
parts were included in the physical count of goods in Paul's warehouse on December 31,
2009 because the parts were on the loading dock waiting to be picked up by customers.
3. Parts in transit on December 31, 2009 to customers, shipped FOB shipping point, on
December 28, 2009 amounted to P68,000. The customers received the parts on January 6,
2010. Sales of P80,000 to the customers for the parts were recorded by Paul on January 2,
2010.
4. Retailers were holding P420,000 at cost (P500,000 at retail), of goods on consignment
from Paul, the consigner , at their stores on December 31, 2009.
5. Goods were in transit from F Company to Paul on December 31, 2009. The cost of the
goods was P50,000 and they were shipped FOB shipping point on December 29, 2009.
6. A quarterly freight bill in the amount of P4,000 specifically relating to merchandise
purchases in December 2009, was received on January 4, 2010. The freight bill was not
included in either the inventory or in accounts payable at December 31, 2009.
7. All of the purchases from A Company occurred during the last seven days of the year.
These items have been recorded in accounts payable and accounted for in the physical
inventory at cost before discount. Paul's policy is to pay invoices in time to take
advantage of all cash discounts, adjust inventory accordingly, and record accounts
payable, net of cash discounts.
