Ashley Company engaged in the following transactions in August 20x1: Aug. 4 Purc
ID: 2620975 • Letter: A
Question
Ashley Company engaged in the following transactions in August 20x1:
Aug. 4 Purchased merchandise on account at a cost of $ 14,000; terms 2/10, n/30, FOB shipping Point.
Aug. 6 Paid freight of $200 on the purchase of August 4.
Aug. 10 Sold goods for $10,000; terms 2/10, n/30. The cost of goods sold is $9,000.
Aug. 12 Returned to the vendor, $2,400 worth of the merchandise purchased on August 4.
Aug. 14 Paid the amount due on the purchase of August 4.
Requirement:
1) Using the template, prepare journal entry for Ashley transactions assuming:
i) Periodic system.
ii) Perpetual system.
Ashley Company
Journal Entries
Date
Account Name
Periodic System
Perpetual System
August
Debit
Credit
Debit
Credit
4
6
10
a)
b)
12
14
Ashley Company
Journal Entries
Date
Account Name
Periodic System
Perpetual System
August
Debit
Credit
Debit
Credit
4
6
10
a)
b)
12
14
Explanation / Answer
The following is the answer for the journal entries to be posted for the two different system
Periodic System:
Journal Entry
August
4 ; Purchase Account Dr USD 14000
To Accounts Payable Cr USD 13720
To Purchase Discount Cr USD 280
(Since the merchandise was purchased at a term of 2/10 net 30 ie a discount of 2% is availed at the FOB shipping point).
6 .Freight A/C Dr USD 200
To Bank A/C Cr USD 200
(Being the Freight Payable for the purchase as on 4th of August)
10. Accounts Receivable A/c Dr USD 10000
To Sales Discount A/c Cr USD 200
To Sales A/c Cr USD 9800
(Being goods sold at the net discoount of 2/10 net 30 ie 2% discount is accounted for in Sales discount)
12. Accounts Payable A/C Dr USD 2400
To Purchase Return Cr USD 2400
(being the goods worth USD 2400 returned from the purchase of 4 th August)
14. Accounts Payable A/C Dr USD 11520
To Bank A/C Cr USD 11520
(Being the net amount payable on the purchase of 4 th August)
Perpetual Inventory System
4 . Inventory A/C Dr USD 14000
To Accounts Payable Cr USD 14000
(Being the purchase of merchandise as on 4th of August)
Accounts Payable A/C Dr USD 280
To Inventory A/C Cr USD 280
(Being the discount on Purchases 2/10 net 30)
6. Inventory A/C Dr USD 200
To Bank A/C Cr USD 200
(Being Freight Paid)
10. Account Receivable A/C Dr USD 10000
To Sales A/C Cr USD 10000
(being the sale of merchandise as on 10th of August)
Cost of Goods Sold A/C Dr USD 200
To Inventory A/C Cr USD 200
(Being the sale of inventory at a discount of 2/10 net 30)
12. Accounts Payable A/C Dr USD 2400
To Inventory A/C Cr USD 2400
(Being the purchase returns recorded)
14 Inventory A/c Dr USD 11520
To Bank A/C Cr USD 1152
(Being the net amount payable for the purcahse due as on 4th August)
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