Question

Prepare journal entries to record the following merchandising transactions of Cabela's, which uses the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and payable for example, record the purchase on July 1 in Accounts Payable-Boden.) July 1 Parehased merchandis e Bodes Company for $6,00 rode ter of 2/15, /39. Os shipping point La voice dated July 1. 2 Bold merchandise to Creek Co. for $1.000 de credit tar of 2/10, 1/6, TOB shipping point, invoice dated July 2. The merchandise had cost $533. 3 Paid $105 cash for freight charges on the purchase of July 1. Solderchandise that had coat 51,700 for $2.100 cash. 9 Purebased merchandise from Light Color 02,90 under reditems of 2/15, /60, on destination, invelee dated July 9. 11 Received a $900 credit and Light Co. for the return of part of the land is purchased on July 9. 12 Received the balance de fr Creek o or the vole dately 3. net of the discount 16 Paid the balance due to Bodes Company within the discount period. 19 Sald a ndise that cost $1.000 A ce for $1,500 of 2/15 /60, TOB shipping plat, invoice dated July 19. 21 Towed 5210 credit and to Art O for allowance on odaald on July 19 24 Paid Leight Cohe haland , net of discount 30 Received the balance due from Art Co. for the Lavice dated July 19 t of discount 31 Bold merchandise that coat 85,200 torekce for $7.200 under e t ter of 2/10, 1/60, OB whipping paint Invoice dated July 31.

Answer 1

Solution:

A perpetual inventory system helps the businesses to keep a real- time account of inventory in hand. Therefore, It is also called continuous inventory system. For every sales, purchase or sales returns, merchandise inventory account requires continuous update.

Date	Journal	Debit($)	Credit($)
July 1	Merchandise Inventory	6,400
	Accounts Payable		6,400
	(Being inventory purchased on credit from Boden co.)
July 2	Accounts Receivable	1,000
	Sales Revenue		1,000
	(Being inventory sold on credit to Creek co.)
	Cost of goods sold	533
	Merchandise Inventory		533
	(Being cost of inventory sold )
July 3	Merchandise Inventory	105
	Cash		105
	(Being freight charges incurred to purchase inventory )
July 8	Cash	2,100
	Sales Revenue		2,100
	(Being inventory sold in cash)
	Cost of goods sold	1,700
	Merchandise Inventory		1,700
	(Being cost of inventory sold )
July 9	Merchandise Inventory	2,900
	Accounts Payable		2,900
	(Being inventory purchased on credit from Leight co.)
July 11	Accounts Payable	900
	Merchandise Inventory		900
	( Being return of goods purchased on July 9)
July 12	Cash [$1,000 x (100 - 2)%]	980
	Sales Discount ( $1,000 x 2%)	20
	Accounts Receivable		1,000
	(Being cash received from Creek co. for goods sold on July 2 within 10 days and hence provided discount of 2%)
July 16	Accounts Payable	6,400
	Cash [$6,400 x (100% - 2%)]		6,272
	Purchase Discount ( $6,400 x 2%)		128
	(Being cash paid to Boden co. for goods purchased on July 1 within 15 days and hence received discount of 2%)
July 19	Accounts Receivable	1,500
	Sales Revenue		1,500
	(Being inventory sold on credit to Art co.)
	Cost of goods sold	1,000
	Merchandise Inventory		1,000
	(Being cost of inventory sold )
July 21	Sales return and allowances	250
	Accounts Receivable		250
	( Being goods returned by Art co.)
July 24	Accounts Payable ( $ 2,900 - $ 900 )	2,000
	Cash [$2,000 x (100% - 2%)]		1,960
	Purchase Discount ( $2,000 x 2%)		40
	(Being cash paid to Leight co. for goods purchased on July 9 within 15 days and hence received discount of 2%)
July 30	Cash [$1,250 x (100 - 2)%]	1,225
	Sales Discount ( $1,250 x 2%)	25
	Accounts Receivable ($ 1,500 - $ 250)		1,250
	(Being cash received from Art co. for goods sold on July 19 within 15 days and hence provided discount of 2%)
July 31	Accounts Receivable	7,200
	Sales Revenue		7,200
	(Being inventory sold on credit to Creek co.)
	Cost of goods sold	5,200
	Merchandise Inventory		5,200
	(Being cost of inventory sold )