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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

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

Printer Supply Company sells computer printers and printer supplies. One of its products is a toner cartridge for laser printers. At the beginning of 2019, there were 225 cartridges on hand that cost $62 each. During 2019, Printer Supply purchased 1,475 cartridges at $62 each. After inspection, Printer Supply determined that 15 cartridges were defective and returned them to the supplier. Printer Supply also sold 830 cartridges at $95 each and sold an additional 710 cartridges at $102 each after a midyear selling price increase. Customers returned 20 of the cartridges that were purchased at $102 to Printer Supply for miscellaneous reasons. Assume that Printer Supply uses a perpetual inventory system.

Required:

1. Prepare summary journal entries to record the purchases, sales, and return of inventory. Assume that all purchases and sales are on credit and no sales returns were expected at the time of sale.

2. What is the cost of ending inventory, cost of goods sold, and gross profit for 2019?

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 entries for the given transactions.

Explanation

The journal entries for the given transactions are explained as follows:

Printer Supply Company
Journal Entries
Periodic Inventory System
# Account Title Debit Credit
1 Merchandise Inventory (225*62) $ 91,450
Accounts Payable $ 91,450
(Being merchandises purchased on account)
2 Accounts Payable $ 930
Merchandise Inventory (15*62) $ 930
(Being merchandise returned to supplier)
3 Accounts receivable (830*95) $ 78,850
Sales Revenue $ 78,850
(Being merchandise sold on account)
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 calculate:

The ending inventory, cost of goods sold and Gross Profit for the year 2019.

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