Question

Refer to Exercise 4-3 and prepare journal entries to record each of the merchandising transactions assuming that the buyer uses the periodic inventory system and the gross method.

Short answer

Answer

Both debit and credit sides of the journal amount to $26,500.

Step-by-step solution

Step-by-Step SolutionStep 1: Definition of Periodic Inventory System

The reporting system under which a business entity calculates the inventory by physical inspection once at year-end is known as a periodic inventory system.

Journal entries for the buyer

Date	Accounts and Explanation	Debit $	Credit $
April 2	Purchases	4,600
	Account payable		4,600
April 3	Freight-In	300
	Cash		300
April 4	Accounts payable	600
	Purchase return and allowance		600
April 17	Accounts payable	4,000
	Purchase discount		80
	Cash		3,920
April 18	Purchases	8,500
	Account payable		8,500
April 21	Account payable	500
	Purchase allowance		500
April 28	Accounts payable	8,000
	Purchase discount		80
	Cash		7,920
		$26,500	$26,500