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. First-in-First-Out ( FIFO): In this method, items purchased initially are sold first. So, the value of the ending inventory consist the recent cost for the remaining unsold items. Prepare journal entry for the given transaction of Company STC; assume that the company uses FIFO 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) 1,590 Inventories 1,590 (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 $1,590. Therefore, debit cost of goods sold account with $1,590. Inventory is an asset and decreased by $1,590. Therefore, credit the inventory account with $1,590. Prepare journal entry for the transaction occurred on May 4 . Date Account Titles and Explanations Post...

6th Edition

ISBN: 9781259864230

Author: PHILLIPS, Fred, Libby, Robert, Patricia A.

Publisher: Mcgraw-hill Education,

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Chapter 7, Problem 9COP

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

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Chapter 7, Problem 8COP

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