MODULE 1(A) - EXERISES

Perpetual Inventory System- purchase transactions

ABC Company purchased merchandise for $20 each and sells it for $50 each.

1. Record purchase
a. Purchase for cash
Example: On January 3, ABC purchased 100 units of merchandise from K
Company for cash, FOB Destination of $50.

DATE PARTICULAR DEBIT CREDIT

b. Purchase for credit

Example: On January 5, ABC purchased 1,000 units of merchandise from X
Company term 3/15, n/45, FOB Shipping point of $150.

DATE PARTICULAR DEBIT CREDIT

2. Purchase return and allowances (R &A)

a. Purchase return for cash
Example: On January 7, returned 10 units of merchandise to K Company.

DATE PARTICULAR DEBIT CREDIT

Page 1 of 13
 b. Purchase return for credit
Example: On January 10, returned 100 units of merchandise to X Company.

DATE PARTICULAR DEBIT CREDIT

3. Record payment – only when purchased on credit

a. Within discount period
Example: On January 13, paid X Company

DATE PARTICULAR DEBIT CREDIT

b. After discount period

Example: Paid X Company on January 27

DATE PARTICULAR DEBIT CREDIT

Perpetual Inventory System- sales transactions

ABC Company purchased merchandise for $20 each and sells it for $50 each.

1. Record sales
a. Sales for cash
Example: On January 13, ABC sold 200 units of merchandise to M Company
for cash, FOB shipping point of $35.

DATE PARTICULAR DEBIT CREDIT

Page 2 of 13
 b. Sales on credit
Example: On January 15, ABC sold 700 units of merchandise to F Company
term 2/10, n/30, FOB Destination of $65.

DATE PARTICULAR DEBIT CREDIT

2. Record sales return

a. Return for cash
Example: On January 19, M Company returned 10 units of merchandise

DATE PARTICULAR DEBIT CREDIT

Page 3 of 13
 b. Return for credit
Example: On January 20, F Company returned 15 units of merchandise

DATE PARTICULAR DEBIT CREDIT

3. Received payment ( only if sold for credit)

a. Within discount period
Example: Received payment from F Company on January 23

DATE PARTICULAR DEBIT CREDIT

b. After discount period

Example: Received payment from F Company on January 28

DATE PARTICULAR DEBIT CREDIT

Page 4 of 13
 Perpetual Inventory System - Example:

Sara Company purchased merchandise for $50 unit each and sold it for $80 units each.
On April 1, there are 500 units of merchandise on hand. The following transactions were
completed during April.

April 1 Purchased 2,000 units of merchandise from A Company

term 3/15,n/45, FOB Shipping point of $100
April 3 Purchased 500 units of merchandise from B Company for cash,
FOB Destination of $50.
April 5 Sold 1,000 units of merchandise to G Company term 2/10,
n/45, FOB Destination of $100.
April 7 Returned 100 units of merchandise to A Company
April 10 G company returned 50 units of merchandise
April 11 Returned 50 units of merchandise to B Company
April 12 Paid the amount due to A Company
April 17 Sold 2,000 merchandise to H Company term 2/10, n/30,
FOB Destination of $100.
April 20 Received payment from G Company
April 24 H Company returned 100 units of merchandise
April 25 Received payment from H Company.

Required:
1. Journalize transaction above using perpetual inventory system
2. Prepare income statement up to gross profit

Page 5 of 13
 Periodic Inventory System- purchase transactions

ABC Company purchased merchandise for $20 each and sells it for $50 each.

1. Record purchase
a. Purchase for cash
Example: On January 3, ABC purchased 100 units of merchandise from K
Company, FOB Destination of $50.

DATE PARTICULAR DEBIT CREDIT

b. Purchase for credit

Example: On January 5, ABC purchased 1,000 units of merchandise from X
Company term 3/15, n/45, FOB Shipping point of $150.

DATE PARTICULAR DEBIT CREDIT

2. Purchase return and allowances (R &A)

a. Purchase return for cash
Example: On January 7, returned 10 units of merchandise to K Company.

DATE PARTICULAR DEBIT CREDIT

Page 6 of 13
 b. Purchase return for credit
Example: On January 10, returned 100 units of merchandise to X Company.

DATE PARTICULAR DEBIT CREDIT

3. Record payment – only when purchased on credit

a. Within discount period
Example: On January 13, paid X Company

DATE PARTICULAR DEBIT CREDIT

b. After discount period

Example: Paid X Company on January 27

DATE PARTICULAR DEBIT CREDIT

Page 7 of 13
 Periodic Inventory System- sales transactions

ABC Company purchased merchandise for $20 each and sells it for $50 each.

1. Record sales
a. Sales for cash
Example: On January 13, ABC sold 200 units of merchandise to M Company
for cash, FOB shipping point of $35.

DATE PARTICULAR DEBIT CREDIT

b. Sales on credit
Example: On January 15, ABC sold 700 units of merchandise to F Company
term 2/10, n/30, FOB Destination of $65.

DATE PARTICULAR DEBIT CREDIT

2. Record sales return

a. Return for cash
Example: On January 19, M Company return 10 units of merchandise

DATE PARTICULAR DEBIT CREDIT

Page 8 of 13
 b. Return for credit
Example: On January 20, F Company returned 15 units of merchandise

DATE PARTICULAR DEBIT CREDIT

3. Received payment ( only if sold for credit)

a. Within discount period
Example: Received payment from F Company on January 23

DATE PARTICULAR DEBIT CREDIT

b. After discount period

Example: Received payment from F Company on January 28
DATE PARTICULAR DEBIT CREDIT

Page 9 of 13
 Periodic Inventory System - Example:

Sara Company purchased merchandise for $50 unit each and sold it for
$80 units each. On April 1, there are 500 units of merchandise on hand.
The following transactions were completed during April.

April 1 Purchased 2,000 units of merchandise from A Company

term 3/15,n/45, FOB Shipping point of $100
April 3 Purchased 500 units of merchandise from B Company for cash,
FOB Destination of $50.
April 5 Sold 1,000 units of merchandise to G Company term 2/10,
n/45, FOB Destination of $100.
April 7 Returned 100 units of merchandise to A Company
April 10 G company returned 50 units of merchandise
April 12 Paid the amount due to A Company
April 15 Returned 10 units of merchandise to B Company
April 17 Sold 2,000 merchandise to H Company term 2/10, n/30,
FOB Destination of $100.
April 20 Received payment from G Company
April 24 H Company returned 100 units of merchandise
April 25 Received payment from H Company.

Required:
1. Journalize transaction above using periodic inventory system
2. Prepare income statement up to gross profit

Page 10 of 13
 Exercises
Ex 1:

Weaam Company purchased merchandise at $10 each and sells the merchandise at
$30 each. At the beginning of May, company has 600 units of merchandise on hand.
The following transactions were completed during May 2017.

May 2 Sold 300 units of merchandise to R Company on account term 3/15,

n/45; FOB Destination of $150.
May 5 Purchased 800 units of merchandise from W Company on account
term 2/10; n/30; FOB Shipping point of $200.
May 7 Purchased 200 units of merchandise from S Company for cash;
FOB Destination of $100.
May 9 R Company returned 50 units of merchandise.
May 11 Sold 600 units of merchandise to N Company on account term
2/10; n/30; FOB Destination of $200.
May 13 Returned 20 units of merchandise to S Company.
May 15 Received payment from R Company.
May 16 Returned 100 units of merchandise to W Company and included a
check for the remaining balance due.
May 18 Sold 150 units of merchandise to H Company for cash; FOB Shipping
point of $100.
May 22 Purchased 400 units of merchandise from Z Company on account
term 2/10, n/30; FOB Shipping point of $150.
May 25 N Company returned 40 units of merchandise and included a check
for the remaining amount due.
May 27 H company returned 30 units of merchandise.

Required:
1. Prepare journal entry to record the above mentioned transaction assuming
company use periodic inventory system
2. Prepared income statement for the month

Ex 2:

Rawan Company purchases inventory at $20 each and sells it at $50

each. The company uses periodic inventory system to record the
inventory. On June 1, there are 500 units of inventory on hand. The
company engaged in the following transactions during the month of June
for the current year.

Page 11 of 13
 June 2 Purchased 10,000 units of inventory from X Co. term 3/15,n/45; FOB
Shipping point of $100
June 4 Purchased 3,000 units of merchandise from M Co for cash; FOB
Destination of $55
June 5 Sold 5,000 units of inventory to L Co. for cash, FOB Destination of $200
June 7 Returned 1,000 units of merchandise to X Co.
June 10 Purchased 10,000 units of merchandise from K Co on account term
2/10,n/30; FOB Shipping point of $150
June 11 Sold 9,000 units of merchandise to R Co on account term 3/15,n/30;
FOB Destination of $120.
June 13 Paid the amount due to X Co.
June 15 L Co. returned 500 units of merchandise
June 22 Returned 1,000 units of merchandise to K Co. and included a
cheque for the remaining balance.
June 24 Sold 5,000 units of merchandise to W Co. on account term 2/10,n/30;
FOB Shipping point of $130
June 25 Received payment from R Co.
June 30 W Co returned 200 units of merchandise and included a cheque for
the remaining balance.

Instructions: -
a. Journalize the transactions using periodic inventory system.
b. Prepare income statement for the month of June.

Ex 3:

Sundus Company purchases inventory at $30 each and sells it at $50 each. The
company uses periodic inventory system to record the inventory. On June 1, there
are 200 units of inventory on hand. The company engaged in the following
transactions during the month of June for the current year.

Sold 150 units of merchandise to M Company on account term

June 2
2/10,n/30; FOB Destination of $200.
Purchased 1,000 units of merchandise to Z Company on account
June 4
term 2/10,n/30; FOB Shipping point of $300
June 5 M Company returned 20 units of damaged merchandise
Sold 100 unit of merchandise to W Company for cash; FOB Shipping
June 7
point of $200
June 10 Received payment form M for the amount due
June 11 Returned 40 units of merchandise to Z Company
Purchased 300 units of merchandise from H Company on account
June 13
term 3/15,n/45: FOB Shipping point of $50

Page 12 of 13
 Sold 500 units of merchandise from D Company on account term 2/10,
June 15
n/30; FOB Shipping point of $500.
June 22 Paid the amount due to Z Company
Return 20 units of merchandise to H Company and include the
June 25
payment for the amount due.
D Company returns 10 units of merchandise and includes the payment
June 30
for the remaining units due.

Instructions:-
a. Journalize the transactions assuming company use perpetual inventory
system
b. Prepare income statement for the month of June.

Ex 4:

Faten Company purchase merchandise at $10 each and sell merchandise

at $15 each. During the first year of operations, ending inventory balance
is 200 units. Company completed the following transactions for the month
of January

January 5 Purchased 300 units of merchandise form S Company on account

term 3/15, n/45; FOB Shipping point of $150.
January 7 Purchased 100 units of merchandise form M Company for cash;
FOB Destination of $50
January 10 Sold 200 units of merchandise to C Company on account term
2/10,n/30; FOB Destination of $100.
January 12 Returned 20 units of merchandise to S Company and included the
payment for the remaining balance
January 16 Sold 50 units of merchandise to D Company for cash; FOB Shipping
point of $20
January 19 Purchased 400 units of merchandise from W Company on account
term 2/10,n/30; FOB Shipping point of $150
January 22 C Company returned 10 units of merchandise and included the
payment for the remaining balance
January 23 Sold 300 units of merchandise to L Company on account term
2/10, n/30; FOB Destination of $150
January 25 Returned 50 units of merchandise to W Company
January 29 Received payment from L Company

Required:

1. Journalize the transaction using perpetual inventory system.

2. Prepare income statement up to gross profit for the month of January.

Page 13 of 13