Exercise 8-1 (Algo) Perpetual inventory system; journal entries [LO8-1] John's Specialty Store uses a perpetual inventory system. The following are some inventory transactions for the month of May: John's purchased merchandise on account for $5,300. Freight charges of $450 were paid in cash. John's returned some of the merchandise purchased in (1). The cost of the merchandise was $750 and John's account was credited by the supplier. Merchandise costing $2,950 was sold for $5,500 in cash. Required: Prepare the necessary journal entries to record these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Question

Brody Wood

Business

30 October, 07:59

Exercise 8-1 (Algo) Perpetual inventory system; journal entries [LO8-1] John's Specialty Store uses a perpetual inventory system. The following are some inventory transactions for the month of May: John's purchased merchandise on account for $5,300. Freight charges of $450 were paid in cash. John's returned some of the merchandise purchased in (1). The cost of the merchandise was $750 and John's account was credited by the supplier. Merchandise costing $2,950 was sold for $5,500 in cash. Required: Prepare the necessary journal entries to record these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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Selina Harrell · Answer 1

The journal entries are shown below:

1. Merchandise Inventory A/c $5,300

To Accounts payable A/c $5,300

(Being inventory purchased on credit)

2. Merchandise inventory A/c Dr $450

To Cash A/c $450

(Being freight is paid by cash)

3. Account payable A/c Dr $750

To Merchandise inventory A/c $750

(Being returned inventory is recorded)

4. Cash A/c Dr $5,500

To Sales revenue A/c $5,500

(Being cash is collected)

5. Cost of goods sold A/c Dr $2,950

To Merchandise inventory A/c $2,950

(Being inventory sold at cost)