Question

L Messi commenced Barca Traders by contributing inventory of $300 and cash of $10,000. N Purchased inventory costing $2,000 on credit. 4 Returned defective goods, which cost $400, purchased on 2 January. 10 Sold goods for $1,200 (cost price $850), collecting cash of $500 with the remainder on credit 12 Goods costing $200 and sold on credit for $300 were returned by the customer 14 Paid the amount owed on the 2 January purchase. 31 Physical stock take showed $1,200 of inventory on hand. Required: (a) Prepare general journals entries for the month of January using the perpetual inventory method. NB: Ignore GST (b) Prepare general journals entries for the month of January using the periodic inventory method. NB: Ignore GST (c) Prepare Trial Balance as at 31 January using the perpetual inventory method. NB: Ignore GST (d) Prepare an extract of the Income Statement for the periodic inventory method for January 2020

Answer 1

Date Credit Debit 300 10.000 10,300 Capital Trial Balance Account Title Debit Credit Accounts Receivable 400 (700-300) 10300 (10000+300) Cash 8900 (10000+500-1600) Cost of Goods Sold 700 (850-200+50) Inventory 1200 Sales 1200 Sales Return 300 11500 11500 2,000 2,000 400 400 500 500 700 Perpetual Inventory Method Account Title 1-Jan Inventory Cash Cash Capital (Introduction of Capital) 2-Jan Inventory Accounts Payable in (Purchase inventory on credit) 4-Jan Accounts Payable Inventory (Purchase return) 10-Jan Cash Sales (Sales on cash) 10-Jan Accounts Receivable Sales (Sales on credit) 10-Jan Cost of Goods Sold Inventory (Cost of Goods Sold of sales) 12-Jan Sales Return Accounts Receivable (Sales return accounted) 12-Jan Cost of Goods sold COSTO (Cost of Goods Sold of sales return) 14-Jan Accounts Payable Cash (2000-400-Payment of Party) 31-Jan Cost of Goods Sold Inventory (loss of inventry) 700 850 850 300 300 Inventory 200 200 1,600 50 50 Add: Less: Less: Add: Opening Inventory Purchases Purchase return Sales Sales Return 300 2,000 (400) (850) 200 1,250 (1,200) 50 Less:Physical Stock Loss Credit Income Statement Periodical Inventory Method Date Account Title 1-Jan Inventory Cash Debit 300 10,000 Capital Sales Less:Sales Return 1200 -300 10,300 Purchases 2,000 Less:Cost of Goods Sold Gross Profit 900 700 200 2,000 400 400 500 500 700 700 (introduction of Capital) 2-Jan Accounts Payable (Purchase inventory on credit) 4-Jan Accounts Payable Purchase returns (Purchase return) 10-Jan Cash Sale Sales Isole (Sales on cash) 10-Jan Accounts Receivable Sales Sales (Sales on credit) 12-Jan Sales Return Accounts Receivable (Sales return accounted) 14-Jan Accounts Payable Cash (2000-400-Payment of Party) At the end of the period: Inventory(Ending Inventory) Purchases Purchase returns Inventory(Opening Inventory) Cost of Goods Sold(Balancing Figures) 300 300 1,600 1,600 1,200 2,000 400 300 700 2,300 2,300 Add: Less: Less: Add: Opening Inventory Purchases Purchase return Sales Sales Return 300 2,000 (400) (850) 200 1,250 (1,200) 50 Less:Physical Stock Loss Under periodic inventory system inventory account is not updated for each purchase and each sale. All purchases are debited to purchases account. At the end of the period, the total in purchases account is added to the beginning balance of the inventory to compute cost of goods available for sale. The ending inventory is determined at the end of the period by a physical count and subtracted from the cost of goods available for sale to compute the cost of goods sold.