Genuine Accessories Inc. uses a perpetual inventory system and records purchases at the net cost and sales at gross invoice price. The following are recent merchandising transactions: Mar. 6 Purchased 60 machines from Village Hardware on account. Invoice price, $350 per unit. The terms of purchase were 3/10, n/30. Mar. 11 Sold 15 of these machines on account for $525 each to White Electric Inc. (2/10, n/60). Mar. 16 Collected cash within the discount period. Mar. 19 Paid in cash to Village Hardware. Payment was made after discount period. Mar. 25 3 units were returned by White Electric Inc. a. Prepare journal entries to record these transactions. b. Assume that Genuine Accessories did pay Village Hardware within the discount period. Prepare journal entries to record this payment assuming that the original liability had been recorded at Net cost and at Gross invoice price. c. Hensley Inc. is a retailer of dentistry equipment. You are told that Hensley’s ending inventory is $258,000 and its cost of goods sold is $515,000. Company had $120,000 of inventory at the beginning of the year. What was the dollar amount of goods purchased by Hensley during the year? d. The income statement of a merchandising company includes a major type of cost that does not appear in the income statement of a service type business. Identify the cost and explain what it represents. e. In your opinion which companies prefer perpetual inventory system over periodic to record the inventory related transactions and which companies do the opposite. Furthermore, why do you think that companies take a physical inventory? When and how they do it? f. Accounting is sometimes described as the language of business. What is meant by this description? Provide a critical review of the description. How would you justify the statement that financial accounting information is general purpose information and not managerial or tax information
Genuine Accessories Inc. uses a perpetual inventory system and records purchases at the net cost
and sales at gross invoice price. The following are recent merchandising transactions:
Mar. 6 Purchased 60 machines from Village Hardware on account. Invoice price, $350 per unit. The terms of purchase were 3/10, n/30.
Mar. 11 Sold 15 of these machines on account for $525 each to White Electric Inc. (2/10, n/60).
Mar. 16 Collected cash within the discount period.
Mar. 19 Paid in cash to Village Hardware. Payment was made after discount period.
Mar. 25 3 units were returned by White Electric Inc.
a. Prepare
b. Assume that Genuine Accessories did pay Village Hardware within the discount period. Prepare journal entries to record this payment assuming that the original liability had been recorded at Net cost and at Gross invoice price.
c. Hensley Inc. is a retailer of dentistry equipment. You are told that Hensley’s ending inventory is $258,000 and its cost of goods sold is $515,000. Company had $120,000 of inventory at the beginning of the year. What was the dollar amount of goods purchased by Hensley during the year?
d. The income statement of a merchandising company includes a major type of cost that does not
appear in the income statement of a service type business. Identify the cost and explain what it represents.
e. In your opinion which companies prefer perpetual inventory system over periodic to record the
inventory related transactions and which companies do the opposite. Furthermore, why do you think that companies take a physical inventory? When and how they do it?
f. Accounting is sometimes described as the language of business. What is meant by this description? Provide a critical review of the description. How would you justify the statement that financial accounting information is general purpose information and not managerial or tax information?
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