James Company began the month of October with inventory of $22,000. The followin
ID: 2426570 • Letter: J
Question
James Company began the month of October with inventory of $22,000. The following inventory transactions occurred during the month: a. The company purchased merchandise on account for $32,500 on October 12, 2016. Terms of the purchase were 2/10, n/30. James uses the net method to record purchases. The merchandise was shipped f.o.b. shipping point and freight charges of $570 were paid in cash. b. On October 31, James paid for the merchandise purchased on October 12. c. During October merchandise costing $19,050 was sold on account for $29,400. d. It was determined that inventory on hand at the end of October cost $35,370. Required: 1. Assuming that the James Company uses a periodic inventory system, prepare journal entries for the above transactions including the adjusting entry at the end of October to record cost of goods sold. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 2. Assuming that the James Company uses a perpetual inventory system, prepare journal entries for the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Explanation / Answer
1- Under Periodic Inventory Sysytem Inventory Account not updated for each purchase and Sale.All Purchases are debited to Purchase Account. At end of the period total in Purchase account is addes to Opening Inventory to compute cost of Goods available for Sale.
Journal Entries-
Net Purchase= 32500-2%=31850
2- Perpetual inventory system- In Prepetual Inventory System inventory and cost of goods sold are updated continuously on each sale and purchase transaction.
Date Account Head Debit Credit 12-Oct Purchases $31,850.00 Account Payble $31,850.00 Freight Expense $570.00 Cash $570.00 31-Oct Account Payble $31,850.00 Purchase Discount Lost $650.00 Cash A/c $32,500.00 Account Receivable $29,400.00 Sales $29,400.00 Inventory-Ending $35,370.00 Cost of Goods Sold $18,480.00 Purchase $31,850.00 Inventory -Begning $22,000.00Related Questions
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