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( Appendices 6A and 6B) 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 at a cost of $62 each. During 2019, Printer supply purchased 1,475 cartridges at $62 each, sold 830 cartridges at $95 each, and sold an additional 710 cartridges at $102 each after a midyear selling price increase. Printer Supply returned 15 defective cartridges to the supplier. In addition, customers returned 20 cartridges that were purchased at S102 to Printer Supply for various reasons.
Assume that Printer Supply uses a periodic inventory system.
Required:
1. Prepare journal entries to record the purchases, sales, and return of inventory. Assume that all purchases and sales are on credit and no 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?
3. CONCEPTUAL CONNECTION If you have previously worked Exercise 6-49, compare your answers. What are the differences? Be sure to explain why the differences occurred.
(a)
Periodic inventory system:
Under periodic inventory system, quantity and value of sales are recorded and sales are recorded only on value basis thus quantity of cost of goods sold and closing inventory was not available. At the year end, we calculate closing inventory with physical verification of stock and subtract with available quantity to determine actual quantity sold.
Recording the transaction:
The transactions of sales and purchases are recorded at the time of sale and purchase of goods by debiting one account and crediting the other account.
The journal entries to record the sale, purchase and return of inventory for Printer Supply Company.
Ledgers prepared on the basis of journal entries. Whenever accounts are prepared, firstly there is journal entry than ledger prepares as per debit and credit entries of journals.
Following are the journal entries for
Company purchased
| Date | Particular | Debit $ | Credit $ |
| Accounts Payable | |||
| (To record purchase on account) |
Company sold
| Date | Particular | Debit $ | Credit $ |
| Accounts Receivables Account | |||
| Sales Account | |||
| (To record sales on account |
Company sold
(b)
Inventory costing methods:
FIFO, LIFO and average cost method, are those method which used for calculation of closing inventory and cost of goods sold.
The cost of closing inventory, cost of goods sold, and gross profit for
(c)
Inventory costing methods:
FIFO, LIFO and average cost method, are those method which used for calculation of closing inventory and cost of goods sold.
The difference of the results in two same answers.
Chapter 6 Solutions
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