Question

Record the journal entries for each of the transactions below using BOTH merchandise accounting methods: Periodic and Perpetual.

1. Your company bought $1,000 (+13% HST) of merchandise for cash.

2. Your firm made a payment to an inventory supplier on account. The amount paid was $535, and you took the following terms: 3/10, n30.

3. Defective Merchandise that you bought several weeks ago was returned for a cash refund. It was $700 (+13% HST)

4. You sold $2,000 (+ 13% HST) of inventory to a customer for cash. The value of the merchandise was $1,200.

5. You paid Federal Express to ship one of your recent inventory purchases to yourself. The bill was $200 (+13% HST). You paid it in cash.

Answer 1

Periodic Inventory System
No	Account Title	Dr	Cr	Description
1	Purchase	1000
	HST Recoverable (13% ofPurchases)	130		130= 1000*13%
	Cash		1130
2	Accounts Payable	551
	Discount Received	16		3% discount On total Amount . 535 paid after discount
	Cash		535	ie. 535x103/100= 551
				discount = 551x3/100= 16
3	Cash	791
	Purchase return		700
	HST Recoverable		91	13% of Purchase Return ,   700*13%= 91
4	Cash	2260
	Sales		2000
	HST Payable		260	13% of sales as HST Payable    2000x13%= 260
5	Freight Expense Dr	200
	HST Recoverable   Dr	26		13% of 200, 200*13%= 26
	Cash		226	Under Periodic System Expense will be debited

Perpetual Inventory System
No	Account Title	Dr	Cr	Description
1	Merchandise Inventory	1000		Under Perpetual system purchase will be record by debiting Inventory
	HST Recoverable(13% of Inventory)	130		13 % of 1000= 130
	Cash		1130
2	Accounts Payable	551		3% discount On total Amount . 535 paid after discount
	Merchandise Inventory	16		ie. 535x103/100= 551
	Cash		535	discount = 551x3/100= 16
3	Cash	791
	Merchandise Inventory		700	purchase return takes palce inventory will be credited
	HST Recoverable		91	700*13%= 91
4	Cash	2260
	Sales		2000	13% of sales as HST Payable
	HST Payable		260	2000x13%= 260
	Cost of Goods Sold	1200
	Merchandise Inventory		1200	Cost of inventory is 1200. that have to be deduct from cost f goods sold by debiting it.
5	Merchandise inventory   Dr	200
	HST Recoverable     Dr	26
	Cash		226	Under perpetual system expense paid relating to purchase will debit to inventory account

Calculations are shown in descrpition.