Question

John’s Specialty Store uses a periodic inventory system. The following are some inventory transactions for the month of May:

1. John's purchased merchandise on account for $5,700. Freight charges of $650 were paid in cash.

2. John’s returned some of the merchandise purchased in (1). The cost of the merchandise was $950 and John’s account was credited by the supplier.

3. Merchandise costing $3,150 was sold for $5,900 in cash.

 
Required:
Prepare the necessary journal entries to record these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

1. Purchases 5,700 DB

            AP 5700 CR

2. Freight In 650 DB

        Cash 650 CR

3. AP  950 DB

        Purchase Returns  950 CR

4. Cash 5900 DB

        Sales Revenue 5900 CR

5. No Journal Entry required.

Because cost of goods sold isn’t determined continually by the periodic system, it must be determined indirectly after a physical inventory count at the end of the year.