Exercise-2 (Perpetual and periodic inventory system – journal entires)

The beginning inventory of Beta company consisted of  100 units @ $60 each. The following transactions occurred during the month of March 2013.

  • Mar. 05: Purchased 300 units @ $60 each.
  • Mar. 06: Out of 300 units purchased on March 05, 10 units were returned to supplier.
  • Mar: 28: Sold 250 units @ $100 each.

On March 31, 2013, 140 units were found by a physical count.

Required: Make journal entries for the month of June assuming the Beta company uses:

  1. perpetual inventory system.
  2. periodic inventory system.

 Solution:

(1) If perpetual inventory system is used:

March, 05 – entry to record purchase of 300 units on account:

exercise-2-icm-img1

*(300 units × $60) = $18,000

March, 06 – entry to record return of 10 units to supplier:

exercise-2-icm-img2

*(10 units × $60) = $18,000

March, 28 – entries to record sale of 250 units to customers:

a. Entry to realize sales revenue:

exercise-2-icm-img3

*(250 units × $100) = $25,000

b. Entry to update inventory account:

exercise-2-icm-img4

*(250 units × $60) = $15,000

(2). If periodic inventory system is used:

March, 05 – entry to record purchase of 300 units on account:

exercise-2-icm-img5

March, 06 – entry to record return of 10 units to supplier:

exercise-2-icm-img6

March, 28 – entry to record sale of 250 units to customers:

exercise-2-icm-img7

March, 31 – closing entry to create cost of goods sold account and to update inventory account :

exercise-2-icm-img8

*140 × $60 = 8,400

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One Comment on Exercise-2 (Perpetual and periodic inventory system – journal entires)

  1. Hem

    Dear Accounting Management,

    I’ve cumbersome problem in periodic inventory entries and trial balance.

    Beginning Inventory is $4670(not specified as unit/price etc, just as a general), then all the transactions goes without purchasing additional inventories until the end period; only sales on account, cash, and some return on allowances are on the exercise. I’m required to: entering(included special journal), posting to ledger , and finally to trial balance. I’ve done entering and posting as well as trial balance, however, I couldn’t get the ‘debit’ and ‘credit’ in line.

    On ‘entering’ in the journal-as manual entries-I’m really struggle to how the inventory should be recorded, I’ve not come across any example in the text book. There’re sample but, listed on the debit side without debiting other account in the credit side and carry on with other transactions. It’s a major hassle not knowing whether to continue with other transactions while some part of entries still unresolved

    My understanding is if there are stock to be sold and sales has been made, then the stock must reduced in quantity affecting its ending value. However, on my trial balance the beginning stock still has the same value even though sales been made many times during period. I simply following the text book.

    Your help and assistance is highly appreciated

    Regards,
    Hem

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