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 TAC; assume that the company uses LIFO in its perpetual inventory system as follows: Prepare journal entry for the transaction occurred on January 3 . Date Account Titles and Explanations Post. Ref. Debit ($) Credit ($) January 3 Accounts Receivable (Refer working note 1) 30,000 Sales Revenue 30,000 (To record the delivery of 500 tags to vegetarian customers on account) Cost of Goods Sold (Refer working note 1) 13,200 Inventories 13,200 (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 $30,000. 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 $30,000. Cost of goods sold is an expense and increased; hence it has decreased the equity by $13,200. Therefore, debit cost of goods sold account with $13,200. Merchandised inventory is an asset and decreased by $13,200. Therefore, credit the merchandised inventory account with $13,200. Prepare journal entry for the transaction occurred on January 4 . No entry is required for the transaction, because the FOB shipping point records sales, only when goods leave from the shipping point, not when they reach the buyer’s destination. Prepare journal entry for the transaction occurred on January 9 . No entry is required for the transaction, because an order is just an exchange of promises and it is not a transaction. Prepare journal entry for the transaction occurred on January 19 . Date Account Titles and Explanations Post. Ref. Debit ($) Credit ($) January 19 Inventories (Refer working note 1) 29,400 Accounts Payable 29,400 (To record the purchase of inventory on account) Table (2) Description: In this transaction, the order for 700 tags has been placed on January 9 for $43 per tag. However due to delay between the order and shipment date, the supplier reduced the amount that company TAC owed ($43) by granting an allowance of $1 per tag. Hence the cost per tag has been reduced to $42 per tag. Inventory is an asset and increased by $29,400. Therefore, debit the inventory account with $29,400. Accounts Payable is a liability and decreased by $29,400...

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 5COP

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

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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 TAC; assume that the company uses LIFO in its perpetual inventory system.

Solution Summary: The author assumes that Company TAC uses LIFO in its perpetual inventory system. Journal entry is 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 TAC; assume that the company uses LIFO in its perpetual inventory system.

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