Two different companies, Vogel Corporation and Hatcher Corporation, entered into the following inventory transactions during December. Both companies use a perpetual inventory system using the gross method of recording sales discounts.   December 3 – Vogel Corporation sold inventory on account to Hatcher Corporation for $488,000, terms 1/10, n/30. This inventory originally cost Vogel $311,000. December 8 – Hatcher Corporation returned inventory to Vogel Corporation for a credit of $4,300. Vogel returned this inventory to inventory at its original cost of $2,740. December 12 – Hatcher Corporation paid Vogel Corporation for the amount owed.   Required: Prepare the journal entries to record these transactions on the books of Vogel Corporation. What is the amount of net sales to be reported on Vogel Corporation’s income statement? What is the Vogel Corporation’s gross profit percentage?

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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.