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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Recording Purchases

Compass Inc. purchased 1,250 bags of insulation, on account, from Glassco Inc. The bags of insulation cost $5.50 each. Compass paid Turner Trucking $320 to have the bags of insulation shipped to its warehouse. Compass returned 50 bags that were defective and paid for the remainder. Assume that Compass uses the perpetual inventory system and that Glassco did not offer a purchase discount.

Required:

1. Prepare a journal entry to record the purchase of the bags of insulation.

2. Prepare the entry to record the payment for shipping.

3. Prepare the entry for the return of the defective bags.

4. Prepare the entry to record the payment for the bags kept by Compass.

5. What is the total cost of this purchase?

To determine

Concept introduction:

Perpetual Inventory System:

The perpetual inventory system records and updates the inventory after each and every transaction. The inventory balance is updated after each transaction and it is kept up to date at every time.

Requirement 1:

To prepare:

The journal entry to record the purchase.

Explanation

The journal entry to record the purchase is explained as follows:

Compass Inc.
Journal Entries
Perpetual Inventory System
# Acco...
To determine

Concept introduction:

Perpetual Inventory System:

The perpetual inventory system records and updates the inventory after each and every transaction. The inventory balance is updated after each transaction and it is kept up to date at every time.

Requirement 2:

To prepare:

The journal entry to record the payment of shipping.

To determine

Concept introduction:

Perpetual Inventory System:

The perpetual inventory system records and updates the inventory after each and every transaction. The inventory balance is updated after each transaction and it is kept up to date at every time.

Requirement 3:

To prepare:

The journal entry to record the return of defective product.

To determine

Concept introduction:

Perpetual Inventory System:

The perpetual inventory system records and updates the inventory after each and every transaction. The inventory balance is updated after each transaction and it is kept up to date at every time.

Requirement 4:

To prepare:

The journal entry to record the payment.

To determine

Concept introduction:

Perpetual Inventory System:

The perpetual inventory system records and updates the inventory after each and every transaction. The inventory balance is updated after each transaction and it is kept up to date at every time.

Requirement 5:

To calculate:

The total cost of purchase.

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