Mr. A decided to put up his own business. Indeed, he has inherited a considerable amount from his parents. The following events took place after he decided to start a business.

Aug 1. He thought of a venture and he called it My Precious Gifts, a name he got from a movie. He was exuding great inspiration when he transferred P200,000 from his bank account to the business.

2. He bought the following: a) refrigerator – P 8,000; b) Computer – P 25,000; c) Bond papers – P512.00 d) other supplies – P 5,250

3. A supplier offered him precious shirts at P30 apiece. On the same day, he ordered 20,000 units from FOB Shipping point. He paid P1,500 for freight. He would eventually sell them at P120.

4. At the launching date he spent on the following: a) catering services – P10,000 b) giving away shirts – 100 units. He decided to charge this to selling expenses.

5. Because of the launching he received orders. One customer bought 500 units and paid them in cash. Another, an old classmate, wanted to get 1,000 units and promised to pay on August 15. He agreed though he asked for a 25% down payment saying that he is in need of cash as the business is quite new. This classmate used to borrow from him in college and he estimated that 90% of the collectible be recovered.

6. He felt that in the coming days, there would be an endless flow of customers walking in his store that he can’t serve them all just by himself. He hired two helpers to assist him in both the clerical and sales work. They will be paid P300/day.

7-14. 2,000 more units were sold in cash. From August

15. His friend honored his word. He paid everything but he wanted to get another 2,000 units. This time Mr. A agreed to sell it on account though he wanted to remain firm on his estimate.

16. He received the lease contract with the owner of the building where he has now his store. It shows a rate of P7,000 per month, collectible at the end of each month.

17-25 4,000 units were sold. 3,000 were sold on a cash basis and the rest was sold on account to a friend who would pay it next month. He estimates a doubtful expense of 5% on this receivable. He also paid P2,000 to deliver this order.

26. Mr. A withdrew P10,000 from the business as he was in immediate need of cash to pay off personal debt.

27. He received the bills for the print ads he placed at the beginning of the month in connection to the launching of his store. Sunstar and Cebu Daily are payable at month-end, Freeman in Sep. a) Sunstar – a quarter of a page at the rate of P10,000/page b) Cebu Daily – half-page at P9,000/page c) Freeman – full page at P7,000/page

28. He bought another PC to accommodate more transactions in the future. He got it on credit, payable in 20 days at P25,000. He returned 50 defective shirts.

29. After some computations he concluded that office equipment is depreciated on a straight-line basis at 10% per annum.

30. He paid the assistants.(22 day-work period, no-work,no-pay scheme)

Required: Journalize all transactions up to month end, close, and prepare the FS.

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