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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M Wholesale Company began the year with merchandise inventory of \(5,000. During the year, M purchased \)93,000 of goods and returned \(6,600 due to damage. M also paid freight charges of \)1,200 on inventory purchases. At year-end, M’s ending merchandise inventory balance stood at $17,200. Assume that M uses the periodic inventory system. Compute M’s cost of goods sold for the year.
D & T Printing Supplies’ accounting records include the following accounts at December 31, 2018.
Purchases \( 185,200 Accumulated Depreciation—Building \) 21,000
Accounts Payable 7,700 Cash 18,100
Rent Expense 8,600 Sales Revenue 257,800
Building 42,800 Depreciation Expense—Building 4,700
Common Stock 55,000 Dividends 26,500
Retained Earnings 30,400 Interest Expense 1,900
Merchandise Inventory,
Beginning 119,000 Merchandise Inventory,
Ending 102,100
Notes Payable 11,300 Purchase Returns and Allowances 20,700
Purchase Discounts 2,900
Requirements
1. Journalize the required closing entries for D & T Printing Supplies assuming that D & T uses the periodic inventory system.
2. Determine the ending balance in the Retained Earnings account.
Journalize the following transactions for Soul Art Gift Shop. Explanations are not required.
Feb. 3 Purchased \(3,300 of merchandise inventory under terms 3/10, n/EOM, and FOB shipping point.
7 Returned \)900 of defective merchandise purchased on February 3.
9 Paid freight bill of \(400 on February 3 purchase.
10 Sold merchandise inventory on account for \)4,700. Payment terms were 2/15, n/30. These goods cost the company $2,350.
12 Paid amount owed on credit purchase of February 3, less the return and the discount.
28 Received cash from February 10 customer in full settlement of their debt.
Emerson St. Book Shop’s unadjusted Merchandise Inventory at June 30, 2018 was \(5,200. The cost associated with the physical count of inventory on hand on June 30, 2018, was \)4,900. In addition, Emerson St. Book Shop estimated approximately \(1,000 of merchandise sold will be returned with a cost of \)400.
Requirements
1. Journalize the adjustment for inventory shrinkage.
2. Journalize the adjustment for estimated sales returns.
What account is debited when recording the payment of freight when using the periodic inventory system?
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