Explanation Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically. Debit and credit rules: Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts. Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts. Last-in-First-Out ( LIFO): In this method, items purchased recently are sold first. So, the value of the ending inventory consist the initial cost for the remaining unsold items. Prepare journal entry for the given transaction of Company STC; assume that the company uses LIFO in its perpetual inventory system as follows: Prepare journal entry for the transaction occurred on May 2 . Date Account Titles and Explanations Post. Ref. Debit ($) Credit ($) May 2 Accounts Receivable (Refer working note 1) 3,750 Sales Revenue 3,750 (To record the delivery of inventory to customers on account) Cost of Goods Sold (Refer working note 1) 1,620 Inventories 1,620 (To record the cost of goods sold ) Table (1) Description: Accounts Receivable is an asset and there is an increase in the value of asset. So debit the accounts receivable account with $3,750. Sales Revenue is a component of stockholder’s equity and there is an increase in the value of stockholder’s equity. So credit the sales revenue account for $3,750. Cost of goods sold is an expense and increased; hence it has decreased the equity by $1,620. Therefore, debit cost of goods sold account with $1,620. Inventory is an asset and decreased by $1,620. Therefore, credit the inventory account with $1,620. Prepare journal entry for the transaction occurred on May 4 . Date Account Titles and Explanations Post...

Loose Leaf For Fundamentals Of Financial Accounting

6th Edition

ISBN: 9781260159547

Author: Phillips Associate Professor, Fred, Libby, Robert, Patricia

Publisher: McGraw-Hill Education

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Chapter 7, Problem 11COP

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Prepare journal entry for the given transaction of Company STC; assume that the company uses LIFO in its perpetual inventory system.

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Chapter 7, Problem 10COP

Chapter 7, Problem 12COP

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Q-1: What is Perpetual and Periodic Inventory System? Explain the differences between both. Record all the transactional entries for the sales and purchases of inventory.

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Chapter 7 Solutions

Loose Leaf For Fundamentals Of Financial Accounting

Ch. 7 - What are three goals of inventory management?Ch. 7 - Describe the specific types of inventory reported...Ch. 7 - The chapter discussed four inventory costing...Ch. 7 - Which inventory cost flow method is most similar...Ch. 7 - Where possible, the inventory costing method...Ch. 7 - Contrast the effects of LIFO versus FIFO on ending...Ch. 7 - Contrast the income statement effect of LIFO...Ch. 7 - Several managers in your company are experiencing...Ch. 7 - Explain briefly the application of the LCM rule to...Ch. 7 - Prob. 10Q

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Prepare journal entry for the given transaction of Company STC; assume that the company uses LIFO in its perpetual inventory system.

Solution Summary: The author explains journal entry as a set of economic events which can be measured in monetary terms.

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Prepare journal entry for the given transaction of Company STC; assume that the company uses LIFO in its perpetual inventory system.

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