Exercise-1
The following general journal entries are typical entries relating to the acquisition and subsequent sale of goods, using a perpetual inventory system:
2007
Jan. 1 Merchandise Inventory $10,000.00
Accounts Payable $10,000.00
1000 units at $10 per unit
10 Cash 4,200.00
Sales 4,200.00
300 units at $14
10 Cost of Good Sold 3,000.00
Merchandise Inventory 3,000.00
300 units at $10
14 Merchandise Inventory 4,500.00
Cash 4,500.00
600 units at $6.50 per units
20 Cash 11,200.00
Sales 11,200.00
800 units at $14 per unit
25 Cost of Goods Sold 7,750.00
Merchandise Inventory 7,750.00
700 units at $10.00 per unit
100 units at $7.50 per unit
The entry of January 1 records the purchase of merchandise on credit. This entry and others that follow would normally be recorded to special journals; however, for ease of analysis they are recorded in simple two-column general journal form. Unlike the periodic system, which uses the merchandise purchases account, the perpetual system records purchases of merchandise directly in the inventory account.
Each type of good acquired is posted to a specific subsidiary ledger account that contains an explanation similar to that of the journal entry. The actual subsidiary ledger account is also known as a STOCK RECORD CARD. The purpose of the stock record card is to list specific information pertaining to the goods acquired and subsequently sold.
The following represents the typical form of the subsidiary ledger, stock record card:
Items Stock #-324A Description: Hand Tool
Location: Edwood 5 B Basis --FIFO
Received Issued Balance
Date Units Unit Cost Total Cost Units Unit Cost Total Cost Unit Unit Cost Total Cost
2007
Jan. 1 1,000 10.00 10,000 1,000 10.00 10,000
10
300 10.00 3,000 700 10.00 7,000
14 600 7.50 4,500 700 10.00 7,000
600 7.50 4,500
11,500
17 700 10.00 7,000
100 7.50 750 500 7.50 3,750
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