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 consists the initial cost for the remaining unsold items. Prepare journal entry for the given transaction of Company C; assume that the company uses LIFO in its perpetual inventory system as follows: Prepare journal entry for the transaction occurred on January 8 . No entry is required for the transaction, because the FOB destination records sales, only when goods reach the buyers’ destination, not when they leave the seller’s shipping point. Prepare journal entry for the transaction occurred on January 9 . Date Account Titles and Explanations Post. Ref. Debit ($) Credit ($) January 9 Accounts Receivable (Refer working note 1) 7,500 Sales Revenue 7,500 (To record the delivery of 250 tags to customers on account) Cost of Goods Sold (Refer working note 1) 3,300 Inventories 3,300 (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 $7,500. 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 $7,500. Cost of goods sold is an expense and increased; hence it has decreased the equity by ( $1,500 + $1,800 ) $3,300. Therefore, debit cost of goods sold account with $3,300. Inventory is an asset and decreased by $3,300. Therefore, credit the inventory account with $3,300. Prepare journal entry for the transaction occurred on January 11 . No entry is required for the transaction, because an order is just an exchange of promises and it is not a transaction. Prepare journal entry for the transaction occurred on January 17 . Date Account Titles and Explanations Post. Ref. Debit ($) Credit ($) January 17 Cash ( 30 × $125 ) 3,750 Accounts Receivable 3,750 (To record the receipt of cash for the goods delivered on January 11) Table (2) Cash is an asset and there is an increase in the value of asset. So debit the cash account with $3,750. Accounts Receivable is an asset and there is a decrease in the value of asset. So credit the accounts receivable account with $3,750

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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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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GEN COMBO LL FUNDAMENTALS OF FINANCIAL ACCOUNTING; CONNECT ACCESS CARD

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

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