Question

James Company began the month of October with inventory of $16,000. The following inventory transactions occurred during the month:

The company purchased merchandise on account for $23,500 on October 12, 2018. Terms of the purchase were 2/10, n/30. James uses the net method to record purchases. The merchandise was shipped f.o.b. shipping point and freight charges of $510 were paid in cash.

On October 31, James paid for the merchandise purchased on October 12.

During October, merchandise costing $18,150 was sold on account for $28,200.

It was determined that inventory on hand at the end of October cost $21,390.

Required:
1. Assuming that the James Company uses a periodic inventory system, prepare journal entries for the above transactions including the adjusting entry at the end of October to record cost of goods sold.
2. Assuming that the James Company uses a perpetual inventory system, prepare journal entries for the above transactions.

Answer 1

Req 1: periodic Inventory
Journal Entries:
Date	Accounts title and explanations				Debit $	Credit $
12-Oct	Purchases Dr.				23,500
	Accounts payable					23030
	Purchase discount					470
12-Oct	Freight in Dr.				510
	Cash Account					510
31-Oct	Accounts payable Dr.				23030
	Purchase discount Dr.				470
	Cash					23500
31-Oct	Accounts receivable Dr.				28200
	Ssales revenue					28200
31-Oct	Cost of Goods sold Dr.				40010
	Inventory Account					16000
	Purchases Account					23500
	Freight in Account					510
31-Oct	Inventory Dr.				21390
	Cost of goods sold					21390
Req b: Perpetual
Journal Entries:
Date	Accounts title and explanations				Debit $	Credit $
12-Oct	Merchandise Inventory Dr				23030
	Accounts payable					23030
12-Oct	Merchandise Inventory Dr.				510
	Cash					510
31-Oct	Accounts payable Dr.				23030
	Merchandise Inventory Dr.				470
	cash Account					23500
31-Oct	Accounts receivable Dr.				28200
	Ssales revenue					28200
	Cost of goods sold Dr.				18620
	Merchandise Inventory					18620