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Exercise-2 (Perpetual and periodic inventory system –

journal entires)
Posted in: Inventory costing methods (exercises)

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The beginning inventory of Beta company consisted of 100 units @ $60 each. The following transactions occurred during
the month of March 2013.

• Mar. 05: Purchased 300 units @ $60 each.

• Mar. 06: Out of 300 units purchased on March 05, 10 units were returned to supplier.
• Mar: 28: Sold 250 units @ $100 each.

On March 31, 2013, 140 units were found by a physical count.

Required: Make journal entries for the month of June assuming the Beta company uses:

1. perpetual inventory system.

2. periodic inventory system.

Solution:
(1) If perpetual inventory system is used:
March, 05 – entry to record purchase of 300 units on account:
*(300 units × $60) = $18,000

March, 06 – entry to record return of 10 units to supplier:

*(10 units × $60) = $18,000

March, 28 – entries to record sale of 250 units to customers:

a. Entry to realize sales revenue:

*(250 units × $100) = $25,000

b. Entry to update inventory account:

*(250 units × $60) = $15,000

(2). If periodic inventory system is used:

March, 05 – entry to record purchase of 300 units on account:

March, 06 – entry to record return of 10 units to supplier:

March, 28 – entry to record sale of 250 units to customers:

March, 31 – closing entry to create cost of goods sold account and to update inventory account :

*140 × $60 = 8,400

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Exercise-2 (Perpetual and periodic inventory system – journal entires)

HEM

Dear Accounting Management,