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 3 4 7 11 Issued a check for rent deposit, P25,000. 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. Purchased merchandise from Folks Wear, P39,200 less 2% and 1% trade discounts. Terms: FOB Shipping Point, 2/10, 1/15, n/30. Add 12% VAT to the invoice price. gross Paid cash for freight of Folks Wear shipment, P1,440. 1440/1.122 = 1286 Sold merchandise on account to Sari Store, P8,960. Freight collect, P504. Returned merchandise to Folks Wear who credited the account for P1,800. 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 P28,000 for 2 workers. 16 Issued a check in payment of Folks wear account. 17 Received cash in full of 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. 1220 Sold merchandise on account to Robinson's P33,600 plus prepaid freight P1,456. Sold merchandise to Citibank credit cardholders, P9,520. (Considered as cash sales. Use cash in bank account). 22 Received merchandise returned by Robinson's, P4,704. VAT included. 23 Service fee charged by Citibank, P1,125. (Use the title bank service charges and decrease cash in bank) 24 Paid for utilities in cash P5.650 and rent P15,000. 25 Paid for salaries less payroll tax liabilities. 28 Issued a check in payment of the rent P12,500. 30 A physical count of inventory showed P553,000 still unsold.