Alpha Company uses the periodic inventory system for purchase & sales of merchan
ID: 2537435 • Letter: A
Question
Alpha Company uses the periodic inventory system for purchase & sales of merchandise. Discount terms for both purchases & sales are, 2/10, n30 and the gross method is used. Unless otherwise noted, FOB Destination will apply to all purchases & sales. The value of inventory is based on periodic system. On January 1, 2016, beginning inventory consisted of 400 units of widgets costing $10 each. Alpha prepares monthly income statements. The following events occurred during the month of Jan.:
Date
Activity
a.
Jan. 3
Purchased on account 350 widgets for $11 each.
b.
Jan. 5
Sold on account 500 widgets for $30 each. Paid freight out with cash of $150.
c.
Jan. 10
Purchased on account 650 widgets for $12 each.
d.
Jan. 11
Shipping cost for the January 10 purchased merchandise was $400 was paid with a cheque by Alpha directly to the freight company.
e.
Jan. 12
Returned 50 widgets received from Jan. 10 purchase as they were not the correct item ordered.
f.
Jan. 13
Paid for the purchases made on Jan. 3.
g.
Jan. 21
Sold on account 550 widgets for $30 each. Paid freight out with cash of $250.
h.
Jan. 22
Authorize credit without return of goods for 50 widgets sold on Jan. 21 when customer advised that they were received in defective condition.
i.
Jan. 25
Received payment for the sale made on Jan. 5.
j.
Jan. 26
Paid for the purchases made on Jan. 10.
k.
Jan. 31
Received payment for the sale made on Jan. 21.
Use this information to prepare the General Journal entries (without explanation) for the January events. If no entry is required then enter the date and write "No Entry Required."
Date
Activity
a.
Jan. 3
Purchased on account 350 widgets for $11 each.
b.
Jan. 5
Sold on account 500 widgets for $30 each. Paid freight out with cash of $150.
c.
Jan. 10
Purchased on account 650 widgets for $12 each.
d.
Jan. 11
Shipping cost for the January 10 purchased merchandise was $400 was paid with a cheque by Alpha directly to the freight company.
e.
Jan. 12
Returned 50 widgets received from Jan. 10 purchase as they were not the correct item ordered.
f.
Jan. 13
Paid for the purchases made on Jan. 3.
g.
Jan. 21
Sold on account 550 widgets for $30 each. Paid freight out with cash of $250.
h.
Jan. 22
Authorize credit without return of goods for 50 widgets sold on Jan. 21 when customer advised that they were received in defective condition.
i.
Jan. 25
Received payment for the sale made on Jan. 5.
j.
Jan. 26
Paid for the purchases made on Jan. 10.
k.
Jan. 31
Received payment for the sale made on Jan. 21.
Explanation / Answer
Journal Entries Date Account Title and explanation Debit Credit Jan , 03 Inventory $ 3,850 To Account Payable $ 3,850 (To Record the purchase of widgets) Jan , 05 Account Receivable $ 15,000 To Inventory $ 15,000 (to Record the sales ) Jan , 05 Freight $ 150 To Cash $ 150 (To Record the payment of freight) Jan, 10 Inventory $ 7,800 To Account Payable $ 7,800 (To Record the purchase of widgets) Jan, 11 Freight $ 400 To Cash $ 400 (To Record the payment of freight) Jan, 12 Account Payable $ 600 To Inventory $ 600 (to Record the return of material purchase) Jan, 21 Account receivable $ 16,500 To Sales $ 16,500 (To record the sales) Jan, 22 Freight $ 250 To Cash $ 250 (To Record the payment of freight) Jan, 22 Sales $ 1,500 To Account Receivable $ 1,500 (To record the credit for sales defective) Jan, 25 Cash $ 15,000 to Account Receivable $ 15,000 (To record the receipt ) Jan, 26 Account payable $ 7,200 To Cash $ 7,200 (To record the payment) Jan, 26 Cash $ 14,700 Purchase Discount $ 300 To Account Receivable $ 15,000 (To Record the receipt)
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