Problem 7: Sari-Sari Store, Inc.

The account balances in the ledger of Sari-Sari Store Inc. on December 31, 2016 were as follows:

Entry	Debit	Credit
Cash	Php 3,600
Accounts Receivable	30,000
Mdse. Inventory	156,300
Land	200,000
Building	500,000
Accumulated Depreciation		100,000
Accounts Payable		48,600
Notes Payable		350,000
Capital Stock		300,000
Retained Earnings		91,300
Total	Php 889,900	Php 889,900

The following transactions occurred during the year 2017:

1. Sales totaled Php 815,000, 40% of which was received in cash. The cost of merchandise sold amounted to 50% of sales. However, sales returns amounted to Php 5,000. This was to be deducted from the customers account.

2. Fire insurance for 2018 amounting to Php 10,000 was paid.

3. Inventory amounting to Php 500,000 was purchased on credit.

4. Sari-Sari Store Inc. secured a bank loan amounting to Php 100,000 at an interest of 12% per year. Interest is to be paid every three months. The loan was signed on September 1, 2017.

5. The following expenses were paid for in cash:

Sales Salaries	Php 100,000
Supplies	50,000
Utilities	70,000
Miscellaneous	15,000
Total	Php 235,000

6. Wages representing salary of casual employees for the last two weeks of December 2017 amounted to Php 25,000. This is to be paid only on January 15, 2018. The company was forced to hire additional workers during the peak season.

7. The company declared on November 10, 2017 a cash dividend of Php 100,000 to its stockholders which is to be paid on February 1, 2018.

8. Depreciation for the year was estimated at Php 10,000.

9. The company issued additional stocks amounting to Php 30,000 at par value but which were bought for Php 50,000.

10. The company belongs to the 35% government tax bracket. Taxes on a firms earnings for the accounting period are paid during April of the following year.

Requirements:

1. Journalize all transactions.
2. Prepare the Balance Sheet and Income Statement for Sari-Sari Store Ince, as of the end of the year 2017.

Format of a Balance Sheet:

Balance Sheet

As of

Assets		Liabilities
Current Assets:		Current Liabilities:
Cash	xxx	Accounts Payable	xxx
Accounts Receivable	xxx	Notes Payable	xxx
Inventory	xxx	Accrued Expenses	xxx
Prepaid Expense	xxx	Deferred Income	xxx
Fixed Assets:		Long Term Debt	xxx
Land	xxx
Building	xxx	Owners' Equities
Less: Acc'd Depreciation	(xxx)	Capital Stock	xxx
Equipment	xxx	Other Paid-in-Capital	xxx
Less: Acc'd Depreciation	(xxx)	Retained Earnings	xxx
Total Assets	xxx ----	Total L. and O. E.	xxx ----

Format of an Income Statement:

Income Statement

For the period ended

Sales		xxx
Cost of Goods Sold		(xxx)
Gross Margin		xxx
Operating Expenses
Advertising Expenses	xxx
Commission Expenses	xxx
Travelling Expenses	xxx
Representation Expenses	xxx
Depreciation	xxx
Utilities	xxx
Taxes	xxx	(xxx)
Operating Income		xxx
Income Taxes		(xxx)
Net Profit After Taxes		xxx
Add: Retained Earnings, Beg		xxx
Less: Dividend Payments	xxx
Retained Earnings		xxx

Optional