ACCT5001 Week 5 Demonstration Questions
Example 1a) Periodic method (Net Sales)
1/3: Sold merchandise on credit to Holt Ltd for $500 with credit terms of 2/10, net 30. 5/3: Recorded cash sales for the day of $1,250.
6/3: Granted Holt Ltd a credit of $190 on its outstanding bill and allowed credit
9/3: Holt Ltd paid the amount owing.
General Journal
1/3
5/3
6/3
9/3
Partial Income Statement
$
Sales Revenue
Less Sales Returns & Allowances
Net Sales Revenue
Example 1 b): Periodic method (Net Purchases)
3/3Purchased merchandise from Salt for $2,500 with terms of 1/10, net/30.
3/3Paid shipping costs of $250
7/3Received a credit of $500 on defective merchandise purchased from Salt. 12/3 Paid amount owing to Salt.
General Journal
3/3
3/3
7/3
12/3
Partial Income Statement
Cost of Goods Purchased: $
Purchases
Less: Purchase returns
Plus: Freight-in
Cost of goods purchased
BE 5.2: Periodic
Bought inventory on account from Gordon Company for $780. Cost of sales is $580 . Giovanni Company (Buyer)
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Gordon Company (Seller)
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BE 5.2: Perpetual
Giovanni Company (Buyer)
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Gordon Company (Seller)
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* different account entries to periodic
P5.7A (periodic inventory system)
Record the following items for Tri-State Pro Shop. Prepare an Income Statement through to gross profit. Beginning inventory is $3,500. Ending Inv =$4,480 Pepare closing entries.
5/4 Purchase $1,700 from Balata Co, terms 2/10, n60.
7/4 Paid freight $80.
9/4 Return $200 defective inventory to Balata Co.
10/4 Sell $950 on account, terms n30.
12/4 Purchase $660 from Arrow Sportswear, 1/10, n30
14/4 Pay appropriate amount to Balata Co.
17/4 Return $60 defective inventory to Arrow Sportswear.
20/4 Sell $700 on account, terms n30.
21/4 Pay appropriate amount to Arrow Sportswear.
27/4 Grant $75 credit to customers for returned goods.
30/4 Receive $1,100 from credit customers.
P5.7A (Periodic method)
5/4
7/4
9/4
10/4
12/4
14/4
17/4
20/4
21/4
27/4
30/4
Tri-State Pro Shop
(Partial) Income Statement
for the month ending 30 April 2007
$ $ $ Sales Revenue
Less Sales returns & allowances
Net
Revenue
Sales
Cost of goods sold:
inventory
Beginning
Plus Cost of goods purchased:
Purchases
returns
Purchase
Less
Freight-in
Cost of goods purchased
Less Ending inventory
2 Cost of goods sold
Gross profit
Closing entries:
?Close net sales accounts to P&L Summary
?Close Cost of Goods Sold to P&L Summary
?Close of other expenses and rev to P&L Summary
P5.7A (perpetual inventory system)
Record the following items for Tri-State Pro Shop. Prepare an Income Statement through to gross profit. Beginning inventory is $3,500. Prepare closing entries.
5/4 Purchase $1,700 from Balata Co, terms 2/10, n60.
7/4 Paid freight $80.
9/4 Return $200 defective inventory to Balata Co.
10/4 Sell $950 on account, terms n30. The inventory costs $680.
12/4 Purchase $660 from Arrow Sportswear, 1/10, n30
14/4 Pay appropriate amount to Balata Co.
17/4 Return $60 defective inventory to Arrow Sportswear.
20/4 Sell $700 on account, terms n30. The inventory cost $500
21/4 Pay appropriate amount to Arrow Sportswear.
27/4 Grant $75 credit to customers for returned goods. The inventory costs $60.
30/4 Receive $1,100 from credit customers.
P5.7A (Perpetual)
5/4
7/4
9/4
10/4
12/4
14/4
17/4
20/4
21/4
7/4
30/4
Tri-State Pro Shop
(Partial) Income Statement
for the month ending 30 April 2007 Sales Revenue
Less Sales returns & allowances
Revenue
Net
Sales
Less Cost of goods sold
Freight Inwards
Gross profit
Closing entries:
?Close net sales accounts to P&L Summary
?Close CoGS and to P&L Summary
BE5.6
Perpetual inventory records show Inventory $98,000 debit but actual inventory count is $96,800. Record any necessary entry
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Could this occur in a periodic inventory system?
No. as inventory is not perpetually recorded
There is no way of knowing end of period inventory account is lower than it should be.