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 Retail store B uses gross method in a perpetual inventory system: Date Account Title & Explanation Debit ($) Credit($) November 20 Cash 400 Sales Revenue 400 (To record the goods sold to person C for cash) Cost of goods sold 300 Inventory 300 (To record the cost of goods sold incurred) November 25 Accounts receivable 4,000 Sales Revenue 4,000 (To record the goods sold to person V on account) Cost of goods sold 2,500 Inventory 2,500 (To record the cost of goods sold incurred) November 28 Accounts receivable 6,000 Sales Revenue 6,000 (To record the goods sold to N gym on account) Cost of goods sold 4,000 Inventory 4,000 (To record the cost of goods sold incurred) November 29 Sales revenue (1) 600 Accounts receivable 600 (To record the goods returned from N gym) Inventory 400 Cost of goods sold 400 (To record the cost of inventory returned from the N gym) December 6 Cash (3) 5,238 Sales revenue (2) 162 Accounts Receivable 5,400 (To record the cash received from N gym with the sales discount) December 30 Cash 4,000 Accounts receivable 4,000 (To record the cash received from person V) Table (1) Justification: For November 20: Cash is an asset and it increases the value of asset. Hence, debit the accounts receivable by $400. Sales revenue is a component of stock holders’ equity and it increases the value of stockholder’s equity. Hence, credit the sales revenue by $400. 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 $300. Inventory is an asset and it decreases the value of assets. Hence, credit inventory by $300. For November 25: Accounts receivable is an asset and it increases the value of asset. Hence, debit the accounts receivable by $4,000. Sales revenue is a component of stock holders’ equity and it increases the value of stockholder’s equity. Hence, credit the sales revenue by $4,000. 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 $2,500. Inventory is an asset and it decreases the value of assets. Hence, credit inventory by $2,500. For November 28 Accounts receivable is an asset and it increases the value of asset. Hence, debit the accounts receivable by $6,000. Sales revenue is a component of stock holders’ equity and it increases the value of stockholder’s equity...

GEN COMBO LL FUNDAMENTALS OF FINANCIAL ACCOUNTING; CONNECT ACCESS CARD

6th Edition

ISBN: 9781260260083

Author: Fred Phillips Associate Professor

Publisher: McGraw-Hill Education

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Chapter 6, Problem 27E

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Prepare journal entries to record the given transactions; assume that Retail store B uses gross method in a perpetual inventory system.

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Chapter 6, Problem 26E

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GEN COMBO LL FUNDAMENTALS OF FINANCIAL ACCOUNTING; CONNECT ACCESS CARD

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Prepare journal entries to record the given transactions; assume that Retail store B uses gross method in a perpetual inventory system.

Solution Summary: The author assumes that Retail store B uses gross method in a perpetual inventory system; it shows the exact on-hand-inventory at any point of time.

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Prepare journal entries to record the given transactions; assume that Retail store B uses gross method in a perpetual inventory system.

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