Scribd Logo
Upload

Welcome to Scribd!

  • 19 views

    CH 7 Perpetual Inventory System

    Uploaded by

    Justin Chan

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    CH 7 Perpetual Inventory System

    Uploaded by

    Justin Chan
    19 views3 pages

    Original Title

    Ch 7 Perpetual Inventory System

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    19 views3 pages

    CH 7 Perpetual Inventory System

    Uploaded by

    Justin Chan

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    Journal Entries under Perpetual Inventory System

    Transaction Perpetual Inventory System


    Jan 2 Purchase of merchandise Inventory 90,000
    on credit $90k Accounts Payable 90,000

    Jan 3 Purchase returns $4,500 Accounts Payable 4,500


    Inventory 4,500

    Jan 5 Paid cash for freight Inventory 450


    costs on purchases $450 Cash 450

    Jan 11 Payment on account with Accounts Payable 85,500


    a discount Cash 83,790
    (credit terms: 2/10, n/30) [(90,000 – 4,500) x 98%]
    Inventory 1,710
    [(90,000 – 4,500) x 2%]
    Jan 13 Sales of merchandise on Accounts Receivable 54,000
    credit (selling price = Sales Revenue 54,000
    $54k and cost = $27k)
    Cost of Goods Sold 27,000
    Inventory 27,000
    Jan 15 Return of merchandise Sales Returns and Allowances 3,000
    (selling price = $3k and Accounts Receivable 3,000
    cost = $1,500) by
    customer Inventory 1,500
    Cost of Goods Sold 1,500
    Jan 22 Cash received on account Cash 50,490
    with discount (credit [($54,000 – $3,000) x 99%]
    terms: 1/10, n/25) Sales Discounts 510
    [($54,000 – 3,000) x 1%]
    Accounts Receivable 51,000

    1
    Example on Calculation of Ending Inventory and Cost of Goods Sold Under a Perpetual
    Inventory System

    DEF Company provided you with the following data for the year 2xxx:
    Units Unit Cost Total Cost
    January 1 balance 90 $15.00 $1,350
    March 15 purchase 60 $16.00 960
    June 20 purchase 100 $17.50 1,750
    Goods available for sale 250 $4,060

    110 units were sold on May 25 and another 90 units were sold on August 11

    Required: Compute the cost of ending inventory and cost of goods sold under the FIFO,
    LIFO and moving average methods

    FIFO
    Date Purchases Cost of Goods Sold Inventory Balance
    Jan 1 90 x $15 = $1,350
    Mar 15 60 @ $16 = $960 90 x $15 + 60 x $16 =
    $2,310
    May 25 90 @ $15 + 20 @ $16 = $1,670 40 x $16 = $640
    Jun 20 100 @ $17.50= 40 x $16 + 100 x $17.50
    $1,750 = $2,390
    Aug 11 40 @ $16 + 50 @ $17.50 = 50 x $17.50 = $875
    $1,515
    Total cost of goods sold for
    year = $3,185

    May 25 Debit: Cost of Goods Sold $1,670 Credit: Inventory $1,670


    Aug 11 Debit: Cost of Goods Sold $1,515 Credit: Inventory $1,515

    2
    LIFO
    Date Purchases Cost of Goods Sold Inventory Balance
    Jan 1 90 x $15 = $1,350
    Mar 15 60 @ $16 = $960 90 x $15 + 60 x $16 =
    $2,310
    May 25 60 @ $16 + 50 @ $15 = $1,710 40 x $15 = $600
    Jun 20 100 @ $17.50 = 40 x $15 + 100 x $17.50
    $1,750 = $2,350
    Aug 11 90 @ $17.50 = $1,575 40 x $15 + 10 x $17.50 =
    $775
    Total cost of goods sold for year
    = $3,285

    May 25 Debit: Cost of Goods Sold $1,710 Credit: Inventory $1,710


    Aug 11 Debit: Cost of Goods Sold $1,575 Credit: Inventory $1,575

    Weighted Average / Moving Average


    Date Purchases Cost of Goods Sold Inventory Balance
    Jan 1 90 x $15 = $1,350
    Mar 15 60 @ $16 = $960 150 x $15.40 = $2,310
    ($2,310 ÷ 150 = $15.40)
    May 25 110 @ $15.40 = $1,694 40 x $15.40 = $616
    Jun 20 100 @ $17.50 = 140 x $16.90 = $2,366
    $1,750 ($2,366 ÷ 140 = $16.90)
    Aug 11 90 @ $16.90 = $1,521 50 x $16.90 = $845
    Total cost of goods sold for year
    = $3,215

    May 25 Debit: Cost of Goods Sold $1,694 Credit: Inventory $1,694


    Aug 11 Debit: Cost of Goods Sold $1,521 Credit: Inventory $1,521

    You might also like