Question

Dollarmart Inc. uses the periodic inventory system. The beginning inventory was $108,000 and that is the January 1 balance in the inventory account. The ending inventory was $120,000.

The following transactions occurred throughout the year:

1. January 18: Purchased $50,000 of merchandise for resale for cash.
2. March 20: Purchased $80,000 of merchandise for resale on account.
3. April 4: Returned $6,000 of the March 20 purchase.
4. August 22: Purchased $260,000 of merchandise for resale on account.

Required

Using the periodic inventory system, provide all required journal entries for the current year including the December 31 year-end entry.

Answer 1

Journal Entries
Date	Particulars	Debit	Credit
January 18	Purchases A/c	50,000	-
	Cash A/c	-	50,000
	(Purchased merchandise for cash)
March 20	Purchases A/c	80,000	-
	Accounts payable A/c	-	80,000
	(Purchased merchandise on account)
April 4	Accounts payable A/c	6,000	-
	Purchases A/c	-	6,000
	(Returned goods of March 20)
August 22	Purchases A/c	260,000	-
	Accounts payable A/c	-	260,000
	(Purchased merchandise on account)
December 31	Ending inventory	120,000	-
	Cost of Goods sold(Balancing figure)	372,000	-
	Beginning inventory	-	108,000
	Purchases A/c	-	384,000
	(Year-end inventory including COGS)

--There will be no adjustment in inventory account during the year under Periodic inventory system. It will only be adjusted during the year-end, in order to reach out to Cost of goods sold during the year.

----Total amount of purchases to be entered at the end of the year will be calculated as:

=Purchases in cash+ purchases on account- purchases return

=50,000+ 80,000+ 260,000- 6,000

= $384,000

----Cost of goods sold will be calculated as:

=Opening inventory+ Purchases- Closing inventory

=108,000+ 384,000- 120,000

= $372,000