Perpetual Inventory System



[/Q/]
Q6. Perpetual Inventory System
Entity 6A uses a perpetual inventory system. Prepare journal entries to record the following transactions.

[Information for Q6]
Entity 6A had the following transactions in May:
(1) May 1, purchased 600 units of merchandise at $15 per unit cost 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.

[/A/]
1. May 1
To record the purchase of 600 units of merchandise

  Debit Credit
Merchandise inventory 9,000  
     Accounts payable   9,000

[Note]
600 units x $15 = $9,000

2. May 16
To record sales revenue

  Debit Credit
Accounts receivable 4,000  
     Sales   4,000

[Note]
200 units x $20 = $4,000

To record cost of goods sold

  Debit Credit
Cost of goods sold 3,000  
     Merchandise inventory   3,000

[Note]
200 units x $15 = $3,000

3. May 31
Under a perpetual inventory system, inventory account balance is updated as transactions occur and no journal entry is required at the end of period.

a. Ending balance of merchandise inventory
= Purchases – Cost of goods sold
= $9,000 -$3,000 = $6,000

b. Cost of goods sold
= 200 units x $15 = $3,000

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