1. Microprints Inc. had the following transactions for the month of August 20X1
ID: 2517298 • Letter: 1
Question
1. Microprints Inc. had the following transactions for the month of August 20X1
Aug. 2 Sold merchandise on account for $25,000; terms 2/10, n/30, FOB shipping point, freight collect.
18
Received payment for the sale of August 2.
20
A total of $1,000 of the merchandise sold on August 2 was returned, and a full refund was made because it was the wrong merchandise.
28
An allowance of $1,300 was granted on the sale from August 2 because some merchandise was damaged; $1,300 cash was returned to the customer.
2. Ashley Company engaged in the following transactions in August 20x1:
Aug. 4 Purchased merchandise on account at a cost of $ 14,000; terms 2/10, n/30, FOB shipping
point, freight collect.
6
Paid freight of $200 on the purchase of August 4.
10
Sold goods for $10,000; terms 2/10, n/30.
12
Returned to the vendor, $2,400 worth of the merchandise purchased on August 4.
14
Paid the amount due on the purchase of August 4.
Requirement:
1. Prepare journal entries for both Microprints and Ashley transactions assuming:
1. Periodic system.
2. Perpetual system.
2. Your client has asked for advice on whether to use the perpetual or periodic inventory system. Recommend an inventory system giving reasons why it is best for your client.
Your response to Part 2 should be at least one page and must include the title and reference pages. In addition, your paper must be formatted according to the CSU-Global Guide to Writing & APA.
18
Received payment for the sale of August 2.
20
A total of $1,000 of the merchandise sold on August 2 was returned, and a full refund was made because it was the wrong merchandise.
28
An allowance of $1,300 was granted on the sale from August 2 because some merchandise was damaged; $1,300 cash was returned to the customer.
Explanation / Answer
(2)
Perpetual Vs Periodic Method of Accounting
These method of accounting refers the method of inventory recording in the books. It does not impact the accounting of purchase, sales , receipt and payment.
Under perpetual method, Inventory is accounted on the basis of sale and purchase only. And when the physical stock will be taken, loss and excess will be recorded accordingly.
Under Periodic method of accounting, at a specific period end , Stock count mist be taken and should be verified with the physical stock and adjustment must be recorded in books so that books will show the correct picture.
I will advise my client to adopt the periodic accounting system to have a better control over inventory and books.
Entries in the books of Microprints INC (Under Both method) Aug-02 Party Dr 25000 For Sale made Sales Cr 25000 Aug-18 Bank Dr 25000 Amount Collected Party Cr 25000 Aug-20 Sales Return Dr 1000 Sales return Party Cr 1000 Aug-20 Party Dr 1000 Amount paid for sales return Bank Cr 1000 Aug-28 Discount Dr 1300 Allowance for loss stock givem recorded as discount Party Cr 1300 Aug-28 Party Dr 1300 Amount paid to party for loss of stock Bank Cr 1300 Entries in the books of Ashley (Under Both Method) Aug-04 Purchase Dr 14,000.00 Purchase made Vendor Cr 14,000.00 Aug-06 Freight Dr 200.00 Freigh paid Bank Cr 200.00 Aug-10 Party Dr 10,000.00 Sales made Sales Cr 10,000.00 Aug-12 Vendor Dr 2,400.00 Purchase return made to vendor Purchase Return Cr 2,400.00 Aug-14 Vendor Dr 11,368.00 Amount paid to vendor after taling the benefit Bank Cr 11,368.00 of Discount (14000 - 2400)*2% Aug-14 Vendor Dr 232.00 Discount recorded as per term 2/10 net 30 Discount Cr 232.00 (14000 - 2400)*2%.. As amount paid within 10 daysRelated Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.