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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

Record the following transactions in general journal form using the periodic inventory system:

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To determine

Prepare journal entries using the periodic inventory system for the following transactions.

Explanation

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Periodic inventory system: The method or system of recording the transactions related to inventory occasionally or periodically are referred to as periodic inventory system.

Debit and credit rules:

  • Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Journal entries for the transactions are given below.

a) sale of merchandise to W company in terms of 1/10,n/30.

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
20--    
June5Accounts receivable, W company 520 
 Sales  520
(Record sold of merchandise to W company, terms 1/10,n/30   

Table (1)

Description:

  • Accounts Receivable is an asset account. The amount is increased because amount to be received increased, and an increase in asset is debited.
  • Sales are a revenue account. The amount is increased because sale of merchandise to W company.

b) Purchase of merchandise from the M company in terms of 2/10,n/45.

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
20--    
June12Purchases of merchandise 425 
 Accounts payable to M company  425
(Record purchase of merchandise from M company in terms of 2/10,n/45.   

Table (2)

Description:

  • Merchandise is a current asset account. Since merchandise is bought, asset account increased, and an increase in asset is debited.
  • Accounts Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

c) Paid freight charges on merchandise purchased.

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
20--    
June15Freight in 45 
 Cash  45
(Record payment of freight in charges)   

Table (3)

Description:

  • Freight in is an expense account. An increase in expense reduces the equity value, and a decrease in equity is debited.
  • Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

d) Cash received from W company.

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
20--    
June15Cash 514.8 
  Sales discount (Working note 1) 5.2 
 Accounts receivable, W company  520
(Record cash received from W company)   

Table (4)

Description:

  • Cash is an asset account...

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