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. Prepare journal entries to record the given transactions; assume that the Incorporation S uses net method in a perpetual inventory system: Date Account Title & Explanation Debit ($) Credit($) January 6 Accounts receivable 98 Sales Revenue (2) 98 (To record the goods sold to Company W on account) Cost of goods sold 70 Inventory 70 (To record cost of goods sold incurred) January 6 Accounts receivable 76 Sales Revenue (4) 76 (To record the goods sold to Company SP on account) Cost of goods sold 60 Inventory 60 (To record cost of goods sold incurred) January 14 Cash 98 Accounts Receivable 98 (To record the cash received from company W and provide sales discount) February 28 Cash 80 Other revenue (3) 4 Accounts receivable 76 (To record the cash received from company SP) Table (1) Justification: For January 6: Accounts receivable is an asset and it increases the value of asset. Hence, debit the accounts receivable by $98. Sales revenue is a component of stock holders’ equity and it increases the value of stockholder’s equity. Hence, credit the sales revenue by $98. Cost of goods sold is a component of stockholders’ equity and it decreases the value of stockholder’s equity. Hence, debit cost of goods sold by $70. Inventory is an asset and it decreases the value of assets. Hence, credit inventory by $70. For January 6: Accounts receivable is an asset and it increases the value of asset. Hence, debit the accounts receivable by $76. Sales revenue is a component of stock holders’ equity and it increases the value of stockholder’s equity. Hence, credit the sales revenue by $76. Cost of goods sold is a component of stockholders’ equity and it decreases the value of stockholder’s equity. Hence, debit cost of goods sold by $60. Inventory is an asset and it decreases the value of assets. Hence, credit inventory by $60. For January 14: Cash is an asset and it increases the value of asset. Hence, debit the cash account by $98. Accounts receivable is an asset and it decreases the value of asset...

6th Edition

ISBN: 9781260664386

Author: PHILLIPS, LIBB

Publisher: MCG

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Financial Transaction Analysis

The transaction analysis is done with the help of the accounting equation. The basic accounting equation is alternatively known as the balance sheet equation is based on the double-entry system which says that for each transaction happening in a business…

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Chapter 6, Problem 24E

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Prepare journal entries to record the given transactions; assume that the Incorporation S uses net method in a perpetual inventory system.

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Prepare journal entries to record the given transactions; assume that the Incorporation S uses net method in a perpetual inventory system.

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