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 E uses net method in a perpetual inventory system: Date Account Title & Explanation Debit ($) Credit($) July 12 Cash 1,000 Sales Revenue 1,000 (To record the goods sold to Company W for cash) Cost of goods sold 600 Inventory 600 (To record cost of goods sold incurred) July 15 Accounts receivable 4,850 Sales Revenue (2) 4,850 (To record the goods sold to Company C on account) Cost of goods sold 3,500 Inventory 3,500 (To record cost of goods sold incurred) July 16 Accounts receivable 2,910 Sales Revenue (4) 2,910 (To record the goods sold to Company O on account) Cost of goods sold 1,900 Inventory 1,900 (To record cost of goods sold incurred) July 23 Cash (2) 4,850 Accounts Receivable 4,850 (To record the cash received from company C and sales discount provided to company C) July 31 Cash 3,000 Other revenue (3) 90 Accounts receivable (4) 2,910 (To record the cash received from company O) Table (1) Justification: For July 12: Cash is an asset and it increases the value of asset. Hence, debit the accounts receivable by $1,000. Sales revenue is a component of stock holders’ equity and it increases the value of stockholder’s equity. Hence, credit the sales revenue by $1,000. 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 $600. Inventory is an asset and it decreases the value of assets. Hence, credit inventory by $600. For July 15: Accounts receivable is an asset and it increases the value of asset. Hence, debit the accounts receivable by $4,850. Sales revenue is a component of stock holders’ equity and it increases the value of stockholder’s equity. Hence, credit the sales revenue by $4,850. 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 $3,500. Inventory is an asset and it decreases the value of assets. Hence, credit inventory by $3,500. For July 16: Accounts receivable is an asset and it increases the value of asset...

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ISBN: 9781260725254

Author: PHILLIPS

Publisher: MCG

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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…

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Chapter 6, Problem 26E

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

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Chapter 6, Problem 25E

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Which of the following journal entries is appropiate when a credit sales is made under a perpetual inventory (a) Dr. Account receivable Cost of good sold Cr. Sales Merchandise inventory (b) Dr. Account receivable Merchandise inventory Cr. Sales Cost of good sold (c) Dr. Account receivable Cr. Sales (d) Dr. Accounts receivable Cr. Merchandise inventory

2. The entry to record the return of $25 of inventory to a supplier under the perpetual inventory system is recorded with a debit to accounts payable and a credit to purchase discounts. Opurchase returns and allowances and a credit to accounts payable. Oaccounts payable and a credit to inventory. Oinventory and a credit to accounts payable.

In a perpetual system, what would be the journal entry for a sales return. (a) Dr. Sales return and allowance Cr. Account receivable (b) Dr. sales Cr. Account receivable (c) Dr. Sales Cr. Merchandise inventory (d) Dr. Sales return and allowance Merchendise inventory Cr. Account receivable Cost of good solds

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

Solution Summary: The author assumes that Incorporation E uses net method in a perpetual inventory system. It shows the exact on-hand-inventory at any time.

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

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