Question

Required information [The following information applies to the questions displayed below.) James Company began the month of October with inventory of $23,000. The following inventory transactions occurred during the month: a. The company purchased merchandise on account for $34,000 on October 12. Terms of the purchase were 3/10, n/30. James uses the net method to record purchases. The merchandise was shipped f.o.b. shipping point and freight charges of $580 were paid in cash. b. On October 31, James paid for the merchandise purchased on October 12. c. During October merchandise costing $19,200 was sold on account for $29,600. d. It was determined that inventory on hand at the end of October cost $37,360. 2. Assuming that the James Company uses a periodic inventory system, prepare journal entries for the above transactions including the adjusting entry at the end of October to record cost of goods sold. James considers purchase discounts lost as part of interest expense. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Journal Entries:

Periodic Inventory System:
Date	General Journal	Debit	Credit
Oct. 12	Purchases	$34,000
	Accounts Payable		$34,000
	(To record the purchase of inventory on account)
	Freight - in	$580
	Cash		$580
	(To record the payment of freight charges by cash)
Oct. 31	Accounts Payable	$34,000
	Cash		$34,000
	(To record the payment for the merchandise purchased on account)
Oct. 31	Accounts Receivable	$29,600
	Sales Revenue		$29,600
	(To record the sales made on account)
Oct. 31	Cost of goods sold is not recorded at the time of sale under periodic inventory system.
Oct. 31	Cost of Goods Sold	$19,200
	Ending Inventory	$37,360
	Inventory Shrinkage ($23,000 + $34,000 + $580 - $19,200 - $37,360)	$1,020
	Beginning Inventory		$23,000
	Purchases		$34,000
	Freight - in		$580
	(To record the adjusting entry for inventory)