Perpetual inventory system Perpetual inventory system refers to the inventory system that maintains the detailed records of every inventory transactions related to purchases and sales on a continuous basis. It shows the exact on-hand-inventory at any point of time. Journal entries Journal is the book of original entry whereby all the financial transactions are recorded in chronological order. Under this method each transaction has two sides, debit side and credit side. Total amount of debit side must be equal to the total amount of credit side. In addition, it is the primary books of accounts for any entity to record the daily transactions and processed further till the presentation of the financial statements. Accounting rules for journal entries: To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains. To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains. To record: Journal entries in the books of (a) T Company and (b) E Company.

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Chapter 5, Problem 8Q

To determine

Perpetual inventory system

Perpetual inventory system refers to the inventory system that maintains the detailed records of every inventory transactions related to purchases and sales on a continuous basis. It shows the exact on-hand-inventory at any point of time.

Journal entries

Journal is the book of original entry whereby all the financial transactions are recorded in chronological order. Under this method each transaction has two sides, debit side and credit side. Total amount of debit side must be equal to the total amount of credit side. In addition, it is the primary books of accounts for any entity to record the daily transactions and processed further till the presentation of the financial statements.

Accounting rules for journal entries:

To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.

To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

To record: Journal entries in the books of (a) T Company and (b) E Company.

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Belle Garments manufactures customized T-shirts for football teams. The business uses a perpetual inventory system and has a highly labour-intensive production process, so it assigns manufacturing overhead based on direct labour cost. The business operates at a profit margin of 33⅓% on sales. Belle Garments expects to incur $2,205,000 of manufacturing overhead costs and estimated direct labour costs of $3,150,000 during 2025. At the end of December 2024, Belle Line Garments reported work in process inventory of $93,980 - Job FBT 101 - $51,000 & Job FBT 102 - $42,980 The following events occurred during January 2025. i) ii) Purchased materials on account, $388,000. The purchase attracted freight charges of $4,000 Incurred manufacturing wages of $400,000 iii) Requisitioned direct materials and used direct labour in manufacturing. Job # Direct Materials Direct Labour 101 70,220 61,200 102 97,500 115,600 103 105,300 78,200 104 117,000 85,000 iv) Issued indirect materials…