Comprehensive cycle problem: Perpetual System

Comprehensive cycle problem: Perpetual System

 

 

Questions and Answers

  1. Purchased inventory that cost $2,200 on account from Blue Company under terms 1/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $110 were paid in cash. (AS)
    2. Returned $200 of the inventory that it had purchased because the inventory was damaged in transit. The freight company agreed to pay the return freight cost. (AE)
    3. Paid the amount due on its account payable to Blue Company within the cash discount period. (CE)
    4. Sold inventory that had cost $3,000 for $5,000 on account, under terms 2/10, n/45. (AU)
    5. Received merchandise returned from a customer. The merchandise originally cost $400 and was sold to the customer for $710 cash during the previous accounting period. The customer was paid $710 cash for the returned merchandise. www.accountingexplained.com (CE)
    6. Delivered goods FOB destination in Event 4. Freight costs of $60 were paid in cash. (AS)
    7. Collected the amount due on the account receivable within the discount period. (CE)
    8. Took a physical count indicating that $7,970 of inventory was on hand at the end of the accounting period. (AS)

Question b)

[Event] assets = liab. = equity rev. – exp. = net inc. [statement of cash flows]
14350 = 14490 = 14490 – 10030 = 4460
Cash + accts. rec + mdse.inv = accts pay. + ret earn.
Cash + accts. rec + mdse.inv = accts pay. + ret earn.
6380 + 2110 +290  = 4900 + 3300

 

 

 

 

Question c)

Cash A/c Income Statement
Dr Cr Sales 5930
Bal B/fwd 4300 Less opening stock 9000
Cash/bank 2110 Closing 7970
Sales 4900 1030
returns 710 GP 4900
Bal B/fwd 6380
9200 9200 Discounts 100
Returns 310 410
NP 4490
Balance Sheet
Current Assets Statement of change in Equity 14490
Inventory 7970 Add retained Earnings 3300
Cash 6380 14350 Total Equity 17790
Total assets 14350
Owners Equity Cash flow
Common stock 10000 Revenues 5930
Net profit 4490 14490 Operations 1030
14490 Ex 410
cash and cash equivalents 4490

 

 

References

www.accountingexplained.com/financial/inventories/perpetual-journal-entries

 

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