Vitamin Shoppe Co. sells protein powder. Vitamin shoppe Co purchased the powder

Question

Vitamin Shoppe Co. sells protein powder. Vitamin shoppe Co purchased the powder from manufacturers throughout the country. Vitamin shoppe started in 2010 with inventory of $200,000

Info. On vitamin shoppe Co. 2010 purchases:

--Bought on account, inventory of $800,000. The purchase terms were 2/10, n/30

--Vitamin shoppe pays within 10 days and gets the discount

--vitamin shoppe uses NET METHOD to record all purchases

--All of Vitamin shoppe purchases are done with F.O.B. shipping point

--The freight-In charged on the purchase made was $30,000

--Inventory, net of discount, costing $40,000, was returned to the protein powder manufacturer

--sales for 2007, all made on account , totaled $830,000

--$424,000 of inventory remained in their stores on 12/31/10

Journalize all of the above using both:

--Close out all temporary accounts relating to inventory

--record the sale

--draw appropriate inventory accounts for each of the methods:

   

1) Period Method

2) Perpetual Method

Explanation / Answer

Perpetual inventory records each transaction in the inventory account as against Periodic inventory system records the inventory when the physical stock counting is made and the closing inventory is recorded.

Journal entries under period inventory method

Journal entries under Perpetual inventory method

Workings for the above journal entries:

Date Account Debit   Credit Narration Yr 2010 Purchase 774,000 For purchase recorded net of return, cash discount and addition of freight cost) To Accounts payable 774,000 For purchase recorded net of return, cash discount and addition of freight cost) Yr end 2010 Inventory 774,000 for net purchases transferred to inventory To purchases 774000 for net purchases transferred to inventory Yr end Cost of Goods sold 550,000 for Cost of goods ascertained and transferred out from inventory To Inventory 550,000 for Cost of goods ascertained and transferred out from inventory Yr 2010 Account receivable 830,000 for sales during the period To Sales 830000 for sales during the period

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