(Record inventory transactions in the periodic system) Wexton Technologies began the year with inventory of $560. During the year, Wexton purchased inventory costing $1,160 and sold goods for $2,600, with all transactions on account Wexton ended the year with inventory of $640. Journalize all the necessary transactions under the periodic inventory system.

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Financial Accounting (11th Edition)

11th Edition
Walter T. Harrison Jr. + 3 others
Publisher: PEARSON
ISBN: 9780134127620
BuyFind

Financial Accounting (11th Edition)

11th Edition
Walter T. Harrison Jr. + 3 others
Publisher: PEARSON
ISBN: 9780134127620

Solutions

Chapter 6A, Problem 1S
Textbook Problem

(Record inventory transactions in the periodic system) Wexton Technologies began the year with inventory of $560. During the year, Wexton purchased inventory costing $1,160 and sold goods for $2,600, with all transactions on account Wexton ended the year with inventory of $640. Journalize all the necessary transactions under the periodic inventory system.

Expert Solution
To determine

To journalize: All the transactions under the periodic inventory system.

Answer to Problem 1S

Journalize the all necessary journal entries under the periodic inventory system.

Date Account title and Explanation Post Ref.

Debit

($)

Credit

($)

1 Purchases   1,160  
  Accounts Payable     1,160
  (To record the purchase of inventory)      
         
2 Accounts Receivable   2,600  
  Sales revenue     2,600
  (To record the Sales revenue)      
         
Year-end entries to record the Cost of goods sold and update the inventory.
3 Cost of Goods Sold   560  
  Inventory (beginning balance)     560
  (To transfer the beginning inventory to Cost of goods sold)      
         
4 Cost of Goods Sold   1,160  
  Purchases     1,160
  (To transfer the purchases to Cost of goods sold)      
         
5 Inventory (ending balance)   640  
  Cost of Goods Sold     640
  (To update the ending inventory based on physical count)      

Table (1)

Explanation of Solution

Purchase of inventory:

  • Purchases (stockholders equity) are increased. Thus, purchases are debited with $1,160.
  • Accounts Payable (liabilities account) is increased. Thus, it is credited with $1,160.

Sale of inventory:

  • Accounts receivable (Asset Account) is increased. Thus, it is debited with $2,600.
  • Sales revenue (Stockholders Equity account) is increased. Thus, it is credited with $2,600.

Transferring the beginning inventory to Cost of Goods Sold:

  • Cost of goods sold (Stockholders Equity account) is increased. Thus, it is debited with $560.
  • Inventory (Asset account) is decreased. Thus, it is credited with $560.

Transferring the purchases to Cost of Goods Sold:

  • Cost of goods sold (Stockholders Equity account) is increased. Thus, it is debited with $1,160.
  • Purchases (stockholders equity) are decreased. Thus, purchases are credited with $1,160.

Update the ending inventory based on physical count:

  • Inventory (asset account) is increased. Thus, it is debited with $640.
  • Cost of Goods Sold (Stockholders Equity) is decreased. Thus, it is credited with $640.

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