Question

Eastland Company maintains a perpetual inventory system. On June 5, Eastland purchased 1,000 inventory units at $3 each, on account. On June 9, Eastland sold 500 units for $7 each, on account. Eastland's inventory method assessed the cost of units sold as $4 each. What is the proper journal entry for Eastland on June 9?

Answer 1

• Since perpetual Inventory system is being followed, the entry to record Sale transaction on June 9 would include:

--recording of sales revenue of $ 3500 [500 x $7], and

--recording and adjustment of cost of goods sold of $ 2000 [500 x $4].

• There can be two ways to record such a transaction:

Alternative #1: Two Entries

Alternative #2: One combined entry

• Alternative #1

Date	Accounts title	Debit	Credit
09-Jun	Accounts receivables	$                   3,500
	Sales revenue		$                   3,500
	(Sales recorded)
09-Jun	Cost of Good Sold	$                   2,000
	Inventory		$                   2,000
	(Cost of goods sold recorded

• Alternative #2

Date	Accounts title	Debit	Credit
09-Jun	Accounts receivables	$                   3,500
	Cost of Good Sold	$                   2,000
	Sales revenue		$                   3,500
	Inventory		$                   2,000
	(Sales recorded and inventory adjusted)