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
2. 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.
3. 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