Chapter 5: Q29RQ (page 295)
Is an adjusting entry needed for inventory shrinkage when using the periodic inventory system? Explain.
Answer
No adjusting entry is passed for the inventory shrinkage.
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Kingston Tires received the following invoice from a supplier (Fields Distribution, Inc.):
Requirements
1. Journalize the transaction required by Kingston Tires on September 23, 2018. Do not round numbers to the nearest whole dollar. Assume tires are purchased on account.
2. Journalize the return on Kingston’s books on September 28, 2018, of the D39–X4 Radials, which were ordered by mistake. Do not round numbers to the nearest whole dollar.
3. Journalize the payment on October 1, 2018, to Fields Distribution, Inc. Do not round numbers to the nearest whole dollar.
Suppose Muddyriver.com sells 2,000 books on account for \(19 each (cost of these books is \)22,800), credit terms 1/20, n/45 on October 10, to The Salem Store. The Salem Store paid the balance to Muddyriver.com on October 22.
Requirements
1. Journalize the Salem Store’s October transactions.
2. Journalize Muddyriver.com’s October transactions. Assume Muddyriver.com uses the gross method to record sales revenue.
How is gross profit calculated, and what does it represent?
When a company has a contract involving multiple performance obligations, how must the company recognize revenue?
Describe the calculation of cost of goods sold when using the periodic inventory system.
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