Question

Ashley Company engaged in the following transactions in August 20x1:

Aug. 4 Purchased merchandise on account at a cost of $ 14,000; terms 2/10, n/30, FOB shipping Point.

Aug. 6 Paid freight of $200 on the purchase of August 4.

Aug. 10 Sold goods for $10,000; terms 2/10, n/30. The cost of goods sold is $9,000.

Aug. 12 Returned to the vendor, $2,400 worth of the merchandise purchased on August 4.

Aug. 14 Paid the amount due on the purchase of August 4.

Requirement:

1) Using the template, prepare journal entry for Ashley transactions assuming:

i) Periodic system.

ii) Perpetual system.

Ashley Company
Journal Entries
Date		Account Name	Periodic System			Perpetual System
August			Debit	Credit		Debit	Credit
4
6
10	a)
	b)
12
14

Answer 1

The following is the answer for the journal entries to be posted for the two different system

Periodic System:

Journal Entry

August

4 ; Purchase Account Dr USD 14000

To Accounts Payable Cr USD 13720

To Purchase Discount Cr USD 280

(Since the merchandise was purchased at a term of 2/10 net 30 ie a discount of 2% is availed at the FOB shipping point).

  

6 .Freight A/C Dr USD 200

To Bank A/C Cr USD 200

(Being the Freight Payable for the purchase as on 4th of August)

10. Accounts Receivable A/c Dr USD 10000

To Sales Discount A/c Cr USD 200

To Sales A/c Cr USD 9800

(Being goods sold at the net discoount of 2/10 net 30 ie 2% discount is accounted for in Sales discount)

12. Accounts Payable A/C Dr USD 2400

To Purchase Return Cr USD 2400

(being the goods worth USD 2400 returned from the purchase of 4 th August)

14. Accounts Payable A/C Dr USD 11520

To Bank A/C Cr USD 11520

(Being the net amount payable on the purchase of 4 th August)

Perpetual Inventory System

4 . Inventory A/C Dr USD 14000

To Accounts Payable Cr USD 14000

(Being the purchase of merchandise as on 4th of August)

Accounts Payable A/C Dr USD 280

To Inventory A/C Cr USD 280

(Being the discount on Purchases 2/10 net 30)

6. Inventory A/C Dr USD 200

To Bank A/C Cr USD 200

(Being Freight Paid)

10. Account Receivable A/C Dr USD 10000

To Sales A/C Cr USD 10000

(being the sale of merchandise as on 10th of August)

Cost of Goods Sold A/C Dr USD 200

To Inventory A/C Cr USD 200

(Being the sale of inventory at a discount of 2/10 net 30)

12. Accounts Payable A/C Dr USD 2400

To Inventory A/C Cr USD 2400

(Being the purchase returns recorded)

14 Inventory A/c Dr USD 11520

To Bank A/C Cr USD 1152

(Being the net amount payable for the purcahse due as on 4th August)