Question

In: Accounting

Home Hardware reported beginning inventory of 20 shovels, for a total cost of $100. The company...

Home Hardware reported beginning inventory of 20 shovels, for a total cost of $100. The company had the following transactions during the month:

Jan. 2 Sold 4 shovels on account at a selling price of $10 per unit.
16 Sold 10 shovels on account at a selling price of $10 per unit.
18 Bought 5 shovels on account at a cost of $5 per unit.
19 Sold 10 shovels on account at a selling price of $10 per unit.
24 Bought 10 shovels on account at a cost of $5 per unit.
31 Counted inventory and determined that 10 units were on hand.

1. Prepare the journal entries that would be recorded using a periodic inventory system.

2. Prepare the journal entries that would be recorded using a perpetual inventory system, including any “book-to-physical” adjustment that might be needed.

Solutions

Expert Solution

1.

Opening    20
Buy                        5
                     10    15
Sales                      (4)
                   (10)
                   (10) (24)
Closing Stocks    11
Physical stock    10
Shortage      1
Periodic Inventory System
Date Particulars Dr.($) Cr.($)
2-Jan Account Receivable 40
Sales 40
(Sold 4 shovels on account at a selling price of $10 per unit)
16-Jan Account Receivable 100
Sales 100
(Sold 10 shovels on account at a selling price of $10 per unit)
18-Jan Purchases 25
Account Payable 25
(Bought 5 shovels on account at a cost of $5 per unit)
19-Jan Account Receivable 100
Sales 100
(Sold 10 shovels on account at a selling price of $10 per unit)
24-Jan Purchases 50
Account Payable 50
(Bought 10 shovels on account at a cost of $5 per unit)
31-Jan Inventory 50
Cost of Goods Sold 125
Purchases 75
Inventory 100
(For updating inventory, closing stock & over short)

2.

Periodic Inventory System
Date Particulars Dr.($) Cr.($)
2-Jan Account Receivable 40
Sales 40
(Sold 4 shovels on account at a selling price of $10 per unit)
16-Jan Account Receivable 100
Sales 100
(Sold 10 shovels on account at a selling price of $10 per unit)
18-Jan Purchases 25
Account Payable 25
(Bought 5 shovels on account at a cost of $5 per unit)
19-Jan Account Receivable 100
Sales 100
(Sold 10 shovels on account at a selling price of $10 per unit)
24-Jan Purchases 50
Account Payable 50
(Bought 10 shovels on account at a cost of $5 per unit)
31-Jan Inventory(Closing inventory) 50
Cost of Goods Sold(balancing figure) 125
Purchases 75
Inventory(beginning inventory 100
(For updating inventory, closing stock & over short)

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