Chapter 5: Q5-8RQ (page 294)
What account is debited when recording a purchase of inventory when using the perpetual inventory system?
When the perpetual inventory system is used, themerchandise inventory account is debited at the time of purchase.
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What account is debited when recording a purchase of inventory when using a periodic inventory system?
Rocky RV Center’s accounting records include the following accounts at December 31, 2018.
Cost of Goods Sold \( 372,000 Accumulated Depreciation—Building \) 38,000
Accounts Payable 16,000 Cash 47,000
Rent Expense 26,000 Sales Revenue 636,500
Building 113,000 Depreciation Expense—Building 13,000
Common Stock 115,000 Dividends 58,000
Retained Earnings 83,100 Interest Revenue 14,000
Merchandise Inventory 239,600
Notes Receivable 34,000
Requirements
1. Journalize the required closing entries for Rocky.
2. Determine the ending balance in the Retained Earnings account.
Describe the single-step income statement.
Journalize the following transactions that occurred in November 2018 for May’s Adventure Park. Assume May’s uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name.
Nov. 4 Purchased merchandise inventory on account from Valera Company, \(8,000. Terms 1/10, n/EOM, FOB shipping point.
6 Paid freight bill of \)160 on November 4 purchase.
8 Returned half the inventory purchased on November 4 from Valera Company.
10 Sold merchandise inventory for cash, \(1,700. Cost of goods, \)680. FOB destination.
11 Sold merchandise inventory to Garrison Corporation, \(10,300, on account, terms of 3/10, n/EOM. Cost of goods, \)5,150. FOB shipping point.
12 Paid freight bill of \(30 on November 10 sale.
13 Sold merchandise inventory to Cain Company, \)9,000, on account, terms of 1/10, n/45. Cost of goods, \(4,500. FOB shipping point.
14 Paid the amount owed on account from November 4, less return and discount.
18 Purchased inventory of \)3,700 on account from Regan Corporation. Payment terms were 2/10, n/30, FOB destination.
20 Received cash from Garrison Corporation, less discount.
26 Paid amount owed on account from November 18, less discount.
28 Received cash from Cain Company.
29 Purchased inventory from Sanders Corporation for cash, \(12,000, FOB shipping point. Freight in paid to shipping company, \)200.
What are the two types of inventory accounting systems? Briefly describe each.
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