Question

Record each using the perpetual method

7-2. Sale of inventory. Now that New Sales has goods on hand, the company can start providing merchandise to customers. The following transactions occurred in the month of May. Complete parts a, b, and May 15 Sold inventory that had cost us $300 for $525 on account. Freight to get the merchandise to our customer cost us $50. May 20 Accepted a return of merchandise which was the wrong color for the customer. We had sold the merchandise for $72; our cost was $56. May 29 Shipped merchandise that had cost us $790 to a customer for $1,050. The customer agreed to pay us in 30 days. May 30 Received a check for the May 15 sale. a. Record the transactions above using the periodic inventory system.

Answer 1

An organisation can maintains inventory perpetual or period method. The main difference between these two methods is. In case of perpetual method inventory updated in books whenever additions and subtractions of inventory. In case periodic method inventory updation in books occurs at the end of the period. Credit Debit $ 525 Date General journal May-15 Accounts receivables Sales revenue (To record sale of inventory) 525 $ 300 May-15 Cost of goods sold Merchandise inventory (To record reduction of inventory) 300 May-15 Delivery expense Cash (To record shipping expenses incurred) 50 May-20 Sales returns and allowances Accounts receivables (To record shipping expenses incurred) May-20 Merchandise inventory Cost of goods sold (To record return of goods sold) 1,050 May-29 Accounts receivables Sales revenue (To record sale of inventory) 1,050 790 May-29 Cost of goods sold Merchandise inventory (To record reduction of inventory) 790 453 May-30 Cash Accounts receivables (To record collection of accounts receivables) 453