27. Cherry Lopez runs the Wear Ever Store which sells ladies wear. The company is VAT registered. All sales and freight are inclusive of 12% VAT. She carries charge accounts for a few customers. To encourage prompt payment she offers cash discounts of 2/10, n/30, FOB Shipping Point. She invested on January 1 merchandise worth P200,000. She also invested P500,000 cash of which P400,000 was deposited with Citibank for the account of the business. The following are the transactions for the month of January:

2 Issued a check for rent deposit, P25,000.

3 Purchased merchandise from a Hong kong distributor for $44,800. Terms: FOB Shipping

Point, 2/10, n/30 with prepaid freight of $280 added to the invoice. The exchange rate is

P5.5 to a Hong Kong Dollar. Add 12% VAT on the purchase price including

freight.

4 Purchased merchandise from Folks Wear, P39,200 less 2% and 1% trade discounts.

Terms: FOB Shipping Point, 2/10, n/30. Add 12% VAT to the gross invoice price.

5 Paid cash for freight of Folks Wear shipment, P1,440.

6 Sold merchandise on account to the Sari-sari store, P8,960. Freight collect, P504.

7 Returned merchandise to Folks Wear who credited the account for P1,800.

11 Issued a check in payment of the Hong Kong account.

14 Summary of cash sales P15,680 which was immediately deposited.

15 Paid cash for salaries P14,000 less a 5% withholding tax.

16 Issued a check in payment of Folks Wear account.

17 Received cash in full from the Sari account. This was immediately deposited with

Citibank.

18 Sold merchandise for cash, P16,800. This was immediately deposited with Citibank.

19 Cash refund to customers amounted to P12,320.

20 Sold merchandise on account to Robinsons P33,600 plus prepaid freight P1,456.

21 Sold merchandise to Citibank credit cardholders, P9,520. (Considered as cash sales.

Use cash in a bank account).

22 Received merchandise returned by Robinsons, P4,704. VAT included.

23 Service fee charged by Citibank, P1,125. (Use the title bank service charges and

decrease cash in the bank).

24 Paid for Utilities in cash P5,650 and rent P15,000.

25 Paid for salaries less 5% withholding tax, 3% SS, 1.5% Philhealth and 2% Pag-ibig.

28 Issued a check in payment of the rent p12,500.

30 A physical count of inventory showed P553,000 still unsold.

Required: 1. Journalize the transactions.

2. Open the creditors and customers subsidiary ledger and post the entries.

3. Post the entries to control accounts. Prove the balances of the subsidiary ledgers

Against the control accounts.

4. Determine the gross profit for the month and the gross profit ratio.