Chapter 5, Problem 5.1CP

To determine

Perpetual Inventory System:

Under Perpetual Inventory System, the value of the inventories is updated on each transaction of purchase or sale. In other words, the entity which uses perpetual inventory system keeps track of their inventories continuously on each purchase or sale of inventories.

To determine:

1. Open T-accounts for all the accounts listed on the trial balance inserting their unadjusted balances.

2. Prepare journal entries and post the adjusting entries at January 31 and compute the ending balances in the T-accounts.

3. Prepare a worksheet consisting of unadjusted trial balance, adjustments and adjusted trial balance for the month ended January 31, 2016.

4. Prepare the multi-step income statement and statement of owner’s equity for the month ended January 31, 2016. Also prepare the balance sheet at the date in report form.

5. Journalize and post the closing entries at January 31.