Explanation 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. August 6: Purchased merchandised from G Incorporation for $14,000, terms of 1/10, and n/60: Date Account Title and Explanation Post Ref. Debit ($) Credit ($) August 6 Inventory 14,000 Accounts Payable 14,000 (To record the purchase of inventories on account) Table (1) Working Note: Cost of inventory=Number of units × Cost per unit =70units × $200 =$14,000 (1) Inventory is an asset and increased by $14,000. Therefore, debit the merchandised inventory account with $14,000. Accounts payable is a liability and increased by $14,000. Therefore, credit the accounts payable account with $14,000. August 7: Paid a freight charge of $400: Date Account Title and Explanation Post Ref. Debit ($) Credit ($) August 7 Inventory 400 Cash 400 (To record the payment of freight charge) Table (2) Merchandised inventory is an asset and increased by $400. Therefore, debit the merchandised inventory account with $400. Cash is an asset and decreased by $400. Therefore, credit the cash account with $400. August 10: Goods returned: Date Account Title and Explanation Post Ref. Debit ($) Credit ($) August 10 Accounts Payable 1,200 Inventory 1,200 (To record the return of inventories on account) Table (3) Working Note: Cost of returned inventory=Number of units returned × Cost per unit =6units × $200 =$1,200 (2) Merchandised inventory is an asset and decreased by $1,200. Therefore, credit the merchandised inventory account with $1,200. Accounts payable is a liability and decreased by $1,200. Therefore, debit the accounts payable account with $1,200. August 14: Company D paid full amount due: Date Account Title and Explanation Post Ref

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ISBN: 9781266401879

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Chapter 6, Problem 11E

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Record the transactions of DS Limited using perpetual inventory system.

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