Q7. Periodic Inventory System
Entity 7A uses a periodic inventory system. Prepare journal entries to record the following transactions.
[Information for Q7]
Entity 7A had the following transactions in May:
(1) May 1, purchased 600 units of merchandise at $15 per unit price on credit.
(2) May 16, sold 200 units of merchandise at $20 per unit price on credit
(3) May 31, counted 400 units of merchandise inventory by a physical inventory taking.
1. May 1
To record the purchase of 600 units of merchandise
600 units x $15 = $9,000
- May 16
To record sales revenue
Under a periodic inventory system, inventory balance is not updated during the period.
The cost of goods sold and inventory accounts are updated at the end of period.
- May 31
To allocate the balance of purchases account to the cost of goods sold and ending merchandise inventory
|Cost of goods sold||3,000(*1)|
(*1) Cost of goods sold
= 200 units x $15 = $3,000
(*2) Ending balance of merchandise inventory
= 400 units x $15 = $6,000