Listed below are selected examples of transactions related to the purchase and sale of merchandise inventory. Assume a perpetual inventory system is in use.
1. Purchase of $2,500 of inventory for cash.
2. Purchase of $4,000 of inventory on account, terms 1/10, n/30.
3. Payment of $250 cash for freight on purchase of inventory (FOB shipping point).
4. Return of $500 of inventory to seller for credit on account.
5. Payment of amount owed ($3,500) for purchase of inventory, terms 1/10, n/30, within discount period. The $3,500 does not include the purchase discount. You will have to calculate this amount.
6. Sale of inventory on account, terms n/30. Selling price $5,000; cost of sale $2,000.
7. Payment of $300 cash for freight on sale of inventory (FOB destination).
8. Return of unwanted inventory from buyer for credit on account. Selling price $1,000; cost of sale $400. Goods restored to inventory for future resale.
9. Return of damaged inventory from buyer for cash. Selling price $750; cost of sale $300. Goods not resaleable are discarded. 10. Receipt of payment ($4,000) from customer on account, terms n/30.
Instructions
For each of the above transactions, indicate: (a) the basic type (e.g., asset, liability, revenue, expense) of each account to be debited and credited; (b) the specific name of the account(s) to debit and credit (e.g., Merchandise Inventory); and (c) whether each account is increased (+) or decreased (-) and by what amount. The first one has been done for you as an example.
Enjoy 24/7 customer support for any queries or concerns you have.
Phone: +1 213 3772458
Email: support@gradeessays.com