Question

Pina Colada Ltd. and Flint Ltd. incurred the following merchandise transactions in June.

Prepare journal entries for the last transaction both (1) a perpetual inventory system (2) a periodic inventory system is used. both for the seller and the buyer JUST THE LAST ONT JUNE 19

June	10		Pina Colada sold $5,300 of merchandise to Flint, terms 1/10, n/30, FOB shipping point. The merchandise cost Duvall $3,180 when it was originally purchased.
	11		Freight costs of $280 were paid by the appropriate company.
	12		Pina Colada received damaged goods returned by Flint for credit. The goods were originally sold for $400; the cost of the returned merchandise was $240. The merchandise was not returned to inventory.
	19		Pina Colada received full payment from Flint.

Answer 1

Solution

Entries in the books of Flint Ltd

(Perpetual inventory system)

Entry for June 19 transaction

Date	Account Titles and Explanation	Ref.Post	Debit	Credit
Jun-19	Cash		$4,851
	Sales Discount		$49
	Accounts Receivables			$4,900
	(To record payment received from customer)

Computation:

Accounts receivable on June 10 = $5,300

Less: sales returns = $400

Accounts receivable on June 19 = $4,900

Sales discount = 1% x 4,900 = $49

Cash received from customer = 4,900 – 49 = $4,851

Periodic Inventory System

Date	Account Titles and Explanation	Ref.Post	Debit	Credit
Jun-19	Cash		$4,851
	Sales Discount		$49
	Accounts Receivables			$4,900
	(To record payment received from customer)

Since the goods are returned before the payment, the accounts receivables value would be less of returns.

The only difference in entries under the perpetual and periodic inventory methods is that the value of cost of goods sold is not reported for both the sale and returns entry.

Hence, inventory balance is not tracked till the end of period.

The entries to record the payment received from customer would be the same under the two methods.