Horne Inc. and Sperling Renovations Ltd. both sell goods and use the perpetual inventory system. Horne Inc. had $3,000 of merchandise inventory at the start of its fiscal year, January 1, 2015. During the 2015, Horne Inc. had the following transactions: May 5 Horne sold $4,000 of merchandise on account to Sperling Renovations Ltd., terms 2/10, net 30. Cost of merchandise to Horne from its supplier was $2,500. 7 Sperling returned $500 of merchandise received in error which Horne returned to inventory; Horne issued a credit memo. Cost of merchandise to Horne was $300. 15 Horne received the amount due from Sperling Renovations Ltd. A physical count and valuation of Horne's Merchandise Inventory at May 31, the fiscal year-end, showed $700 of goods on hand. Required: Prepare journal entries to record the above transactions and adjustment: a. In the records of Horne Inc. b. In the records of Sperling Renovations Ltd.

Horne Inc. and Sperling Renovations Ltd. both sell goods and use the perpetual inventory system. Horne Inc. had $3,000 of merchandise inventory at the start of its fiscal year, January 1, 2015. During the 2015, Horne Inc. had the following transactions: May 5 Horne sold $4,000 of merchandise on account to Sperling Renovations Ltd., terms 2/10, net 30. Cost of merchandise to Horne from its supplier was $2,500. 7 Sperling returned $500 of merchandise received in error which Horne returned to inventory; Horne issued a credit memo. Cost of merchandise to Horne was $300. 15 Horne received the amount due from Sperling Renovations Ltd. A physical count and valuation of Horne's Merchandise Inventory at May 31, the fiscal year-end, showed $700 of goods on hand. Required: Prepare journal entries to record the above transactions and adjustment: a. In the records of Horne Inc. b. In the records of Sperling Renovations Ltd.

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Description: Horne Inc. and Sperling Renovations Ltd. both sell goods and use the perpetual inventory system.Horne Inc. had $3,000 of merchandise inventory at the start of its fiscal year, January 1, 2015.During the 2015, Horne Inc. had the following transaction

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Concept explainers

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.

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Horne Inc. and Sperling Renovations Ltd. both sell goods and use the perpetual inventory system.
Horne Inc. had $3,000 of merchandise inventory at the start of its fiscal year, January 1, 2015.
During the 2015, Horne Inc. had the following transactions:
May 5 Horne sold $4,000 of merchandise on account to Sperling Renovations Ltd., terms 2/10,
net 30. Cost of merchandise to Horne from its supplier was $2,500.
7 Sperling returned $500 of merchandise received in error which Horne returned to
inventory; Horne issued a credit memo. Cost of merchandise to Horne was $300.
15 Horne received the amount due from Sperling Renovations Ltd.
A physical count and valuation of Horne's Merchandise Inventory at May 31, the fiscal year-end,
showed $700 of goods on hand.
Required: Prepare journal entries to record the above transactions and adjustment:
a. In the records of Horne Inc.
b. In the records of Sperling Renovations Ltd.

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