James Company began the month of October with inventory of $16,000. The followin

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.

Explanation / Answer

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

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