Question

Pearl Company sells one product. Presented below is information for January for Pearl Company. Jan. 1 Inventory 105 units at $4 each 4 Sale 83 units at $8 each 11 Purchase 162 units at $7 each 13 Sale 132 units at $9 each 20 Purchase 160 units at $7 each 27 Sale 97 units at $10 each Pearl uses the FIFO cost flow assumption. All purchases and sales are on account.

a. Assume Pearl uses a perpetual system. Prepare all necessary journal entries. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

b. Compute gross profit using the perpetual system.

Gross profit= $

Answer 1

Journal entry

Date	account and explanation	debit	credit
Jan 4	Account receivable (83*8)	664
	Sales revenue)		664
	(To record purchase)
	Cost of goods sold (83*4)	332
	Merchandise inventory		332
	(To record cost of goods sold)
Jan 11	Merchandise inventory (162*7)	1134
	Account payable		1134
	(To record purchase)
Jan 13	Account receivable (132*9)	1188
	Sales revenue		1188
	(To record sales)
	Cost of goods sold	946
	Merchandise inventory		946
	(To record cost of goods sold)
Jan 20	Merchandise inventory (160*7)	1120
	Account payable		1120
	(To record purchase)
Jan 27	Account receivable	970
	Sales revenue		970
	(To record sales)
	Cost of goods sold (52*7+45*7)	679
	Merchandise inventory		679
	(To record cost of goods sold)

Sales = 2822

Cost of goods sold =1957

Gross profit = 2822-1957 = 865