Acc Eng Chap5

5Accounting and inventory
Chapter accounting in the buying and

selling industry processing
 The perpetual inventory
system
Questions and Answers

1 . What is the significant difference in the consolidated income statement for services and buying
and selling?
The income statement for the service sector is roughly the income from services minus
the expenses, resulting in the current profit and loss. Buying and selling goods to
customers, the buying and selling industry itself needs to buy these goods, which is a
significant cost, in addition to the company also needs to buy office buildings, office
equipment and other assets like the service industry to operate. Therefore, the profit
and loss of the buying and selling industry is divided into two stages of calculation, the
sale income minus the cost of goods sold equals the gross profit of the sale, and then
subtract similar to the service industry of various types of expenses, to obtain the
current profit and loss.
2 . What is a perpetual inventory system for inventory?
‧1‧
2
When you buy goods, inventory increases, so you debit inventory, and you immediately
record the decrease in inventory when you sell it. This practice is much like tracking
(counting) the amount of inventory left on the account at any time, hence the term
"continuous inventory system".
3 . What is point-of-shipment delivery and destination delivery?

FoB shipping point means that even if the seller hands over the goods to the buyer at
the point of origin, ownership of the goods is transferred from the seller to the buyer,
so shipping costs after the point of origin are borne by the buyer. In contrast,
destination delivery (FOB destination) means that the seller does not give the goods to
the buyer until the destination is reached, after which ownership of the goods is
transferred from the seller to the buyer, and therefore the freight costs before arrival at
the destination are borne by the seller.
4 . What are the offset accounts for sales and why do they appear?
Return of goods sold, discount of sale and discount of sale. When the buyer discovers
that the incoming item does not match the order, it will notify the seller to return the
item, which in the case is called return of sale for the seller. In another case, where the
buyer found a defect in the goods upon acceptance, there were generally two
treatments: (1) if the defective goods could not continue to be used, the buyer
returned the goods (i.e., the goods were returned), in the case of the seller, the goods
were returned for sale. ( 2 ) If the defective item is available for continued use and the
seller is willing to give a price discount , the buyer's company will accept the goods ,
which in the case of the seller is called a sales allowance . Furthermore, in order to
encourage the buyer to pay the bill earlier, the seller agrees that if the buyer pays
during the discount period, the seller will give the buyer a "cash discount", which the
seller calls a sales discount.
5 . What is the difference between the accounting cycle of the buying and selling industry and the
service industry?
The accounting cycle of the buying and selling industry requires exactly the same steps
as the service industry, but the inventory gain or loss must be handled when adjusting
Chapter 5 Accounting and inventory accounting treatment in the buying and selling industryPerpetual
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inventory system 3
the entry: when the market loses, debit the cost of goods sold, credit inventory, debit
inventory, credit the cost of goods sold.
"Choice questions"
1 . Under the perpetual inventory system, the cost of goods sold is determined on the basis of which
of the following?
( a ) Daily base ( b ) monthly basis
( C ) at the base of each sale each year
(D)
2 . In the perpetual inventory system, which ledger account will be credited when the purchased
goods are returned on credit?
( a ) Accounts payable ( b ) returns and discounts on purchases
( C ) inventory ( ) sales
(C)
3 . Which of the following represents the difference between the revenue from the sale and the
cost of the sale?
( a ) gross profit ( b ) net benefit
( C ) net profit ( ) marginal contribution
(A)
4 . What account is classified as a return and discount account?

(a) Asset account (b) asset offset account
( C ) Expense account ( ) revenue offset account
(D)
5 . Which of the following accounting items has a normal balance at the credit?
( a ) Return and discount ( b ) discount on sale
(C) Sales expenses ( ) sales expenses
(C)
4
6 . Credit memos are generally issued in which of the following situations?

( a ) Employees perform well ( b ) sell goods on credit
( C ) The customer refuses to pay for the return of the goods on credit
(C)
7. Which party will pay for this shipping charge if ZTE (buyer) orders the goods from Sun
Company (seller) and signs the terms of delivery at the point of shipment?
( a ) Seller ( b ) buyer
(C) Both the seller or the buyer of the freight company (D).
(B)
8. Lute single company to pay $600,000 for the purchase of goods, the terms of payment is 1/10,
n/30. Assuming cash is paid after more than 10 days, what is the amount to be paid for this
transaction?
(A) $594,000(B) $600,000
(C) $606,000(D) $6,000
( b ) Analysis: No discount is available because the payment is made over 10 days
9 . What assets are inventory classified as in a classified balance sheet?

( a ) Intangible assets ( b ) real estate , plant and equipment
( C ) Long-term investment in liquid assets ( )
(C)
10 . What is the discount rate for goods sold on credit at $100,000, $8,000 on sale, and $1,840 on
sale?
(A) 1%(B) 2%
(C) 3%(D) 1.84%
(B)
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inventory system 5
Exercise Questions
1. "Accounting Concept of Buying and Selling" Each of the following three sub-topics, the correct
person please fill in the "×":
( 1 ) a. Journals - General Ledger - Trial Balances - Financial statements are all part of the
accounting cycle
b. Classified balance sheets classify asset accounts as current and non-current assets
c. The business cycle refers to the time required to repay current liabilities
d. Current assets are classified as asset liquidity
e. Current liabilities are obligations that will not be repaid until more than one year in the
future
( 2 ) a. The consolidated income statement for services has three main items: sales, cost of
goods sold, operating expenses
b. Operating expenses fall into two broad categories: sales and management expenses
c. Returns and discounts on sales usually have credit balances
d. Return and discount of goods sold as an asset offset account
e. The sales discount is an income offset account, usually with a debit balance
( 3 ) a. Payment terms 3/10, n/30 means that the buyer has a three-day discount period of
10% discount payment, otherwise the account must be paid within 30 days
b. Point-of-delivery means that the seller must bear the freight costs
c. Destination delivery means that the seller must bear the freight costs
d. Destination delivery means that the buyer must debit the "freight" accounting item
e. Gross margin on sale - net sales - cost of goods sold
(1) ○○×○×(2) ×○××○(3) ××○×○
2. "Sustainable inventory system --record diary entries" Ozu company to adopt the perpetual
inventory system, the following is Ozu company × October of the transaction matters:
10/1 Purchase goods from Zhongping company for $20,000 on the terms of delivery at the point of
6
origin and payment terms of 2/10, n/30.

10/3 The sale of goods to Xiaojin is $15,000, the cost is $8,000, the condition of delivery is the
destination, the terms of payment are 1/10, n/30.
10/5 Pay 10/3 freight charges of $500.
10/7 Return $1,000 to Zhongping Company to offset the debt.
10/9 Payment of all arrears owed by Zhongping.
10/11 Xiaojin returns a batch of non-conforming items at a price of $2,000 and $1,200 at cost.
10/13 Clear all payments from Xiaojin.

10/17 Purchased goods on credit from Zhongtian for $30,000 on FOB starting point and payment
terms of 3/10, n/60.
10/20 Pay $800 for 10/17 purchases.
10/25 Sold to Small Copper for $25,000 at a cost of $13,000 (3/10, n/30).
10/28 Little Copper returns the item for $3,000 at a cost of $1,600.
10/31 Pay off the money owed to Zhongtian Company.
Try it out:
The relevant entries of Ozu Company.
10/1 Inventory 20,000

Accounts payable 20,000
10/3 Accounts receivable 15,000

Sales revenue of 15,000
The cost of selling goods is 8,000

Inventory 8,000
10/5 Freight charges 500

Cash 500
10/7 Accounts payable 1,000

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inventory system 7
Inventory 1,000

Cash 18,620
Stock 380
10/11 Return and discount 2,000

Accounts receivable 2,000
Inventory 1,200
10/13 Cash 12,870

Discount 130
10/17 Stock 30,000

10/20 Stock 800

Cash 800


Inventory 13,000

Inventory 1,600
8

Cash 30,000
3. "Perpetual Inventory -RecordJournal Entry" Transactions that occurred at the Three Merchants
Gift Shop in June were as follows:
6/2 Purchase inventory $43,000, purchase terms are START delivery terms (FOB
shipping point) and payment terms are 1/10, n/eom (eom:end of month: end of
month).
6/7 Refund of $5,000 for inventory defects purchased on 6/2 credit.
6/8 Cash payment of 6/2 credit for purchase and deposit of freight costs $600.
6/9 $78,000 on credit, 2/15 on terms of payment, n/30 on credit, and $44,000 on related
merchandise.
6/11 Pay 6/2 for all purchases of inventory on credit.
6/16 A discount of $16,000 is given to 6/9 items sold on credit.
6/23 Receive 6/9 all payments for goods sold on credit.
Try it out:
Record the entry of the three gift shops' June transactions.


Inventory 5,000
6/8 Stock 600

Cash 600

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inventory system 9

Inventory 44,000

Stock 380
Cash 37,620

6/23 Cash 60,760

Discount on sales of 1,240
4. "Perpetual inventory system -accounting handlers for buying and selling" Daying Company × the
opening balance of January 1, 1st, 1st, as follows:
Cash $200 equity $510

Accounts receivable $150 retains surplus (credit) $82
Inventory (and 60 pieces) $72 Profit or loss for the current period $0
Supplies $10 sold for $0

Prepaid rent $60 sales returned with a discount of $0
Land $400 sales discount $0

Equipment $250 cost $0
Accumulated depreciation - $100 for equipment rental expenses $0
Accounts payable $140 payroll costs $0

Notes payable$110 supplies cost $0
Long-term mortgage payable $200 depreciation charge $0

10
The × 1 year deal is summarized as follows:
1. Purchase 150 items at a cost of $150, pay $10 in cash and issue a one-month note of
$30, the remainder.
2. 15 withdrawals, offset by $15 in arrears.
3 . Pay $29.7 for inbound freight.
4 . Pay $135 in accounts payable for purchases made during the year and receive a 2%
cash discount.
5 . Sell 150 pieces, and $900, cash $200, the remaining arrears. The cost of this shipment
is $180.
6 . Return of 5 items for sale, offsetting $30 owed. The cost of returning the item is $6.
7. Purchased supplies $15.
8. Recovery of accounts receivable from credit sales of $400, with a 3 per cent cash
discount.
9. Purchase 100 items on credit, and $120, on the condition that they be delivered at the
destination.
10 . Pay salary $40.
11. 100 items on sale sell for $600 and the cost of the batch is $120.
12 . Accounts payable at the beginning of the payment period amount to $150.
Year-end adjustments:
1. Supplies are still $10 unspent.

2. One third of the rent advances have not yet expired.
3. Office equipment is available for 10 years, with no residual value, and is depreciated in a
straight line manner.
4 . End-of-period field inventory at $54.
Try it out:
(1) Make entries and record them in the journal.

(2) Posted into the ledger.
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inventory system 11
(3) Adjust entries and postings.

(4) Adjusted trial statement.
(5) Make a closing entry and post it.
(6) Consolidated income statement. (7) Changes in equity table. (8) Balance sheet.
(1) Entry
(a) Stock 150

Cash 10
Notes payable 30
Accounts payable 110
(b) Accounts payable 15

Stock 15
(c) Inventory 29.7

Cash 29.7
(d) Accounts payable 135

Cash 132.3
Stock 2.7
(e) Cash 200

Accounts receivable 700
Sales revenue 900
Cost of goods sold 180

Stock 180
(f) Return and discount of 30

12
Stock 6
Cost of goods sold6
(g) Supplies 15
Cash 15
(h) Cash 388

Discount 12
(i) Stock 120

(j) Payroll costs 40

Cash 40
(k) Cash 600

Sales revenue 600

Stock 120
(l) Accounts payable 150

Cash 150
(2) Posting
cash accounts receivable
The 200 (a) 10 The 150 (f ) 30
beginning beginning
of the of the
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inventory system 13
period period
(e) 200 (c) 29.7 (e) 700 (h) 400
(h) 388 (d) 132.3 420
(k) 600 (g) 15
( j) 40
(l) 150
1,011
stocks Supplies
The 72 (b) 15 The 10
beginning beginning
of the of the
period period
(a) 150 (d) 2.7 (g) 15
(c) 29.7 (e) 180 25 adjust 15
(f) 6 (k) 120 10
(i) 120
60 adjust 6
54
Prepaid rent land
The 60 The 400
beginning beginning
of the of the
period period
60 adjust 40 400
20
equipment Accumulated depreciation - equipment
The 250 The 100

14
beginning beginning
of the of the
period period
250 100
adjust 25
125
accounts payable Notes payable
(b) 15 The 140 The 110
beginning beginning
of the of the
period period
(d) 135 (a) 110 (a) 30
(l) 150 (i) 120 140
70
Long-term mortgage payables share capital
The 200 The 510
beginning beginning
of the of the
period period
200 510
Retain the surplus Profit and loss for the current period
The 82 Checkout 462 Checkout 1500
beginning
of the
period
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inventory system 15
82 Checkout 1038
Checkout 1038
1120
Sales revenue Return and discount of goods sold
(e) 900 (f) 30
(k) 600 30 Checkout 300
Checkout 1,500 1,500
Discounts on sales Cost of goods sold
(h) 12 (e) 180 (f) 6
12 Checkout 30 (k) 120
294
adjust 6
300 Checkout 300
Rental costs Payroll costs
adjus 40 Checkout 40 ( j) 40
40 Checkout 40
The cost of supplies Depreciation expense
adjust 15 Checkout 15 adjus 25 Checkout 25
(3) Adjust the entries and post them
Supplies cost 15
Supplies 15
16
The rental fee is 40

Prepaid rent 40
Depreciation expense 25
Accumulated depreciation - equipment 25
Cost of goods sold6

Stock 6
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inventory system 17
(4) Adjust the trial statement
Daying Company
Adjust the trial statement
31 December ×
debit creditor
cash $1,011
accounts receivable 420
stocks 54
Supplies 10
Prepaid rent 20
land 400
equipment 250
Accumulated depreciation - $125
equipment
accounts payable 70
Notes payable 140
Long-term mortgage payables 200
share capital 510
Retain the surplus 82
Profit and loss for the current 0
period
Sales revenue 1,500
Return and discount of goods 30
sold
Discounts on sales 12
Rental costs 40
Payroll costs 40
The cost of supplies 15
18
Total $2,627 $2,627
(5) Make a closing entry and post it
12/31 Sales revenue of 1,500

Profit and loss for the current period of 1,500
Profit and loss for the current period 462

Return and discount 30
Discount 12
The cost of selling goods is 300
Payroll fee 40
Supplies cost 15
Profit and loss for the current period 1,038

Retained surplus of 1,038
(6) Consolidated income statement
Daying Company
Consolidated income statement
1 year ×
Sales revenue $1,500
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inventory system 19
Return and discount of goods $30

sold
Discounts on sales 12 42
Net proceeds from sales $1,458
Gross margin on sale $1,158
Operating expenses
Rental costs $40
Payroll costs 40
Depreciation expense 25 120
Net profit for the current period $1,038
Other consolidated gains and 0
losses
Total consolidated profit and $1,038
loss for the current period
(7) Changes in equity table
Daying Company
Statement of changes in equity
1 year ×
share capital Retain the Total equity
surplus
Opening balance $510 $ 82 $ 592
Net profit for the current 1,038 1,038
period
The balance at the end of $510 $1,120 $1,630
the period
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(8) Balance sheet
Daying Company
balance sheet
31 December ×
asset liability
liquid asset Current liabilities
cash $1,011 accounts payable $ 70
accounts receivable 420 Notes payable 140
stocks 54 Total current liabilities $210
Supplies 10 Non-current liabilities
Prepaid rent 20 Long-term mortgage $200
payables
Total current assets $1,515 Total non-current 200
liabilities
Real estate, plant and Total liabilities $410
equipment
land $400 Rights
equipment $250 share capital $ 510
Accumulated depreciation - (125) 125 Retain the surplus 1,120
equipment
Total real estate, plant and 525 Total equity 1,630
equipment
Total assets $2,040 Total liabilities and $2,040
equity
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inventory system 21
5. Checkout and Schedule: Dayan Company × december 31, 1 year to prepare an adjusted trial balance
as follows:
Try it out:
(1) Checkout entries. (2) Consolidated income statement. (3) Changes in equity table. (4)
Balance sheet.
(1) Checkout entries

Profit and loss for the current period was 55,000

Return and discount of 1,800
Discount on sales of 400
22
Depreciation expense of 2,000

Office supplies cost 400
Payroll costs 5,000
The rent is 3,000

Dayan Corporation
1 year ×
Less: Return and discount of $1,800
goods sold
Discounts on sales 400 (2,200)
Net sales $52,800
Less: Cost of goods sold (36,000)
Gross margin on sale 16,800
Less: Sales management costs
Depreciation expense $2,000
Office supplies 400
Payroll costs 5,000
Rental costs 3,000 (10,400)
Other consolidated gains and 0
losses
Total consolidated profit and $6,400
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inventory system 23
(3) Statement of changes in equity
Dayan Corporation
1 year ×
share capital Retain the Total equity
surplus
Opening balance $43,000 $10,000 $53,000
Net profit for the current 6,400 6,400
period
Dividends for the current (2,000) (2,000)
period
The balance at the end of $43,000 $14,400 $57,400
the period
(4) Balance sheet
Dayan Corporation
balance sheet
31 December ×
liquid asset $45,400 Current liabilities $48,000
Real estate, plant and 80,000 Non-current liabilities 20,000
equipment
Rights 57,400
Total assets $125,400 Total liabilities and equity $125,400
6. Adjusted Entry and Closing Entry for Buying and Selling Industry: The balance × of the profit and
loss account and some asset negative debt account as of February 3, 1st, 1st, 1st of 1st, 1st of
24
1st, 1st of 2001 is as follows:
Stock $ 118,800
Sales of 1,925,000
Discounts on sales of 44,000
Cost of goods sold 1,144,000
Shipping costs 38,500
The cost of insurance is 66,000
Rental costs 110,000
Payroll costs 335,500
Tidal's inventory is recorded as a perpetual inventory, with a positive inventory amount

of$115,000as at 31 December×.
Try it out:
( 1 ) Record the × the inventory adjustment entry as at 31 December 1.

( 2 ) Record the closing entry as of December 31, 1 ×.
(1) 12/31 Cost of sale 3,800

Inventory 3,800
(2) 12/31 Sales revenue of 1,925,000

Profit and loss for the current period was 1,925,000
12/31 Profit and loss for the current period 1,813,300

Discounts on sales of 44,000
Cost of goods sold 1,147,800
Shipping costs 38,500
The cost of insurance is 66,000
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inventory system 25
The rental cost is 110,000

12/31 Profit and loss for the current period 111,700

7. Calculate some of the amounts in the consolidated profit and loss account The following table is
financial information related to the consolidated profit and loss statement for the × 2 years
of Sino-Saints and Blue China.
Zhongsan Company Blue Company

Sales $2,970,000 (4)
The goods are (1) $ 165,000
Net sales 2,739,000 3,135,000
Cost of goods 1,848,000 (5)
Gross margin on (2) 1,254,000
Operating 495,000 (6)
net profit (3) 495,000
Calculates the amount in spaces.
(1)$231,000 ( = $2,970,000 $2,739,000 )

(2)$891,000 ( = $2,739,000 $1,848,000 )
(3)$396,000 ( = $891,000 $495,000 )
(4)$3,300,000 ( = $3,135,000 + $165,000 )
(5)$1,881,000 ( = $3,135,000 $1,254,000 )
(6)$759,000 ( = $1,254,000 $495,000 )
Application Questions
1. "Sustainable inventory system -- Record Journal Entry" Yiyi Shopping Flow Company completed the
following merchandise transactions in August.
26
8/3 Sincewise West purchased goods on credit for $21,240, with destination delivery
payment terms of 2/10, n/30.
8/4 Credit Store $10,400, Destination Delivery, Payment Terms 1/10, n/30, Cost of
CreditEd Goods
$8,200。
8/5 Pay $720 for 8/4 items sold on credit.
8/6 Received a credit note from Nessie for returning $1,000.
8/12 Payment of all payments made by Lacey.
8/13 Receives 8/4 of all purchases for goods sold on credit.
8/15 $8,800 for cash purchases.
8/18 Purchased goods from Dadong for $22,680, with delivery at the point of origin on terms
of 3/10, n/30.
8/20 Pay $350 for 8/18 credit purchases.
8/23 Cash sells goods for $12,800 and the cost of goods is $10,240.
8/25 Purchase goods in cash for $1,900.
8/27 Pay all the purchase prices of Dadong.
8/29 Returned $180 for cash purchases due to a defective item, while the remaining residual
value of the defective item is $60.
8/30 $7,400 on credit, n/30 on terms of payment, and $6,500 on credit.
Try it out:
Record the entry of all merchandise transactions of Yiyi Shopping Flow Company in August
(Iyi Shopping Flow Company's inventory accounting records are based on a perpetual
inventory system).



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inventory system 27
Inventory 8,200
8/5 Freight expense 720

Cash 720

Inventory 1,000

Stock 405
Cash 19,835
8/13 Cash 10,296

Discount 104

Cash 8,800

8/20 Stock 350

Cash 350
8/23 Cash 12,800

Cost of goods sold 10,240

Inventory 10,240

Cash 11,900

Stock 680
Cash 22,000
28
8/29 Return and discount 180

Cash 180
Stock 60


Inventory 6,500
2. Inventory Adjustment and Checkout Entry: Data for December 31×, 11, 2011 from Daguan Company
are as follows:
Sales revenue of $80,000
Return and discount $3,000
Discounted $1,000
Interest income of $3,000
End-of-period inventory $25,000
The cost of selling the goods is $55,000
Freight is sold for $900
Payroll costs $12,500
Depreciation expense of $3,000
The cost of utilities is $1,500
Supplies cost $800
Daguan's inventory at the end of the year was confirmed at $25,500.
Try it out:
(1) Adjusted entries for perpetual inventory.
(2) Checkout entries.
(1) Daguan company entries

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inventory system 29
12/31 Stock 500

12/31 Sales revenue of 80,000

Interest income of 3,000

Return and discount 3,000
Discount on sales of 1,000
Freight charges 900
The cost of utilities is 1,500
Supplies cost 800

30
3. Preparation of financial statements and closing entries The company prepared an adjusted trial balance
on December 31, 1 × as follows:
Try it out:
(1) Consolidated income statement. (2) Changes in equity table. (3) Balance sheet. (4)
Make a checkout entry.
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inventory system 31
Big Love Company

×1 year
Return and discount of goods
$800
sold
Discounts on sales 500 (1,300)
Net sales $58,700
Cost of goods sold (38,000)
Gross margin on sale $20,700
Operating expenses
Depreciation expense $1,000
Office supplies 1,000
Payroll costs 4,000
Rental costs 2,000 (8,000)
Net operating profit $12,700
Loss of operating expenses
Interest charges (1,500)
Other consolidated gains and
0
losses
Total consolidated profit and
$11,200
32
(2) Statement of changes in equity
Big Love Company

1 year ×
share Retain the
Total equity
capital surplus
Opening balance $23,000 $5,000 $28,000
Net profit for the － 11,200 11,200
current period
The balance at the $23,000 $16,200 $39,200
end of the period
(3) Balance sheet
Big Love Company

balance sheet
31 December ×
asset liability
cash $11,700 accounts payable $5,000
accounts receivable 14,500 Notes payable 1,000
Office supplies 500 Pre-received income 3,000
stocks 11,000 Total current liabilities $9,000
Prepaid rent 5,000 Non-current liabilities
Total current assets $42,700 Long-term notes $20,000
payable
Real estate, plant and To meet the company's 28,000
equipment debt
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inventory system 33
Office equipment $28,000 Total long-term $48,000
liabilities
Accumulated depreciation - (3,000) $25,000 Total liabilities $57,000
office equipment
Transport equipment 38,500 Rights
Accumulated depreciation - (10,000) 28,500 share capital $23,000
transportation equipment
Total real estate, plant and $53,500 Retain the surplus 16,200
equipment
Total equity $39,200
Total assets $96,200 Total liabilities and $96,200
equity


Discount on sales of 500
Office supplies cost 1,000
Payroll costs 4,000
Insurance costs 2,000
The rent costs 2,000
Interest charges of 1,500

34
4. "Complete all entries and forms of trading records" Dawei Company × January 1, 1 year account
balance is as follows:
Cash $830 Accounts Receivable $240 Inventory $235 (47 pieces)

Office supplies $30 prepaid rent $50 land $900
Accumulated depreciation of $600 for equipment - $420 for equipment $180 payable
Notes payable $350 Utility bills payable $0 long-term liabilities $880
Equity $950 retains surplus (credit) $105 sales $0
Return and discount $0 sale discount $0 cost of sale $0
Rental costs $0 payroll costs $0 supplies costs $0
Depreciation expense $0 utility expense $0
Transactions for the first quarter of ×1 are summarized below:
1/5 Purchase 100 items at a cost of $500 (2/10, n/30).

1/8 Incoming exit 10 pieces. Offset the outstanding debt of $50.
1/15 Pay $450 in arrears arising from 1/5-day purchase and receive a 2% discount.
1/25 Repay the due $200, which has exceeded the discount period.
2/1 Pay $9 for 1/5-day inbound freight.
2/15 Sell 60 pieces, selling for $900, cashing in $300, the remainder. The cost of this batch is
$300.
2/18 The return of 15 items offsets the arrears of $225, and the cost of the return of the goods
is $75.
2/23 Recovery of accounts receivable $375 gives a 2% cash discount.
3/15 Buy office supplies for $36.
3/16 Buy 30 items on credit at a cost of $150.
3/20 Pay$120.
3/25 48 items sold for $768, cashed out $168, the remainder. The cost of this batch is $240.
3/30 Pay $30 for utilities.
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inventory system 35
3/31 End-of-season adjustments for the first quarter:
1. Office supplies are still $20 unspent.

2. One fifth of the rent advances have not yet expired.
3. Equipment available for 20 years, no residual value, 3 months depreciation.
4. $10 for unpaid utility bills.
5. At the end of the period, the cost of inventory of goods was $380.
Try it out:
(1) Entries are recorded in the journal.

(2) Posted into the ledger.
(3) Adjust the pre-trial statement.
(4) Adjust the entries and post them.
(5) Consolidated income statement.
(6) Make a list of changes in equity.
(7) Balance sheet.
(8) Check out the entries and post them.
(1) Entry
1/5 Stock 500

1/8 Accounts payable 50

Stock 50

Stock 9
Cash 441

Cash 200
36
2/1 Stock 9
Cash 9
2/15 Cash 300

Sell 900

Stock 300
2/18 Return and discount 225

Stock 75
2/23 Cash 367.5

Discount 7.5
3/15 Office supplies36

Cash 36
3/16 Stock 150

3/20 Payroll costs 120

Cash 120
3/25 Cash 168

Sales 768

Stock 240
37
inventory system 37
3/30 Utility costs 30

Cash 30
38
(2) Posting
cash accounts receivable
1/1 830 1/15 441 1/1 240 2/18 225
2/15 300 1/25 200 2/15 600 2/3 375
2/23 367.5 2/1 9 3/25 600
3/25 168 3/15 36 840
3/20 120
3/30 30
829.5
stocks Office supplies
1/1 235 1/8 50 1/1 30
1/5 500 1/15 9 3/15 36
2/1 9 2/15 300 66 3/31 46
2/18 75 3/25 240 20
3/6 150
370
3/31 10
380
Prepaid rent land
1/1 50 1/1 900
50 3/31 40 900
10
equipment Accumulated depreciation - transportation
equipment
1/1 600 1/1 180
600 180
39
inventory system 39
3/31 7.5
187.5
accounts payable Notes payable
1/8 50 1/1 420 1/1 350
1/15 450 1/5 500 350
1/25 200 3/16 150
370
Utilities payable Long-term liabilities
3/31 10 1/1 880
10 880
share capital Retain the surplus
1/1 950 1/1 105
950 105
3/31 727
832
Sales Return and discount of goods sold
2/15 900 2/18 225
3/25 768 225 3/31 225
3/31 1,668 1,668
Discounts on sales Cost of goods sold
2/23 7.5 2/15 300 2/18 75
7.5 3/31 7.5 3/25 240
465 3/31 10
3/31 455
40
Rental costs Payroll costs
3/31 40 3/20 120
40 3/31 40 120 3/31 120
The cost of supplies Depreciation expense
3/31 46 3/31 7.5
46 3/31 46 7.5 3/31 7.5
Water and electricity costs Profit and loss for the current period
3/30 30 3/31 941 3/31 1,668
3/31 10 3/31 727
40 3/31 40
41
inventory system 41
(3) Adjust the pre-trial statement
Dawei Company
Adjust the pre-trial statement
March 31, ×
debit creditor
cash $829.5
accounts receivable 840
stocks 370
Office supplies 66
Prepaid rent 50
land 900
equipment 600
Accumulated depreciation - $180
equipment
accounts payable 370
Notes payable 350
Utilities payable 0
Long-term liabilities 880
share capital 950
Retain the surplus 105
Sales 1,668
Return and discount of goods 225
sold
Discounts on sales 7.5
Rental costs 0
Payroll costs 120
Water and electricity costs 30
42
total $4,503 $4,503
(4) Adjust the entry and post
1.3/31 Supplies cost 46

Office supplies 46
2. Rental costs 40
Prepaid rent 40
3 . Depreciation expense 7.5

Accumulated depreciation - equipment 7.5
4 . Water and electricity costs 10

Utilities payable10
5. Stock 10
Dawei Company
× 1 January to 31 March 2001
Sales $1,668
Return and discount of goods
$225
sold
Discounts on sales (7.5) (232.5)
$1435.5
Cost of goods sold (455)
Gross margin on sale $980.5
Operating expenses
Rental costs $ 40
43
inventory system 43
Payroll costs 120

Depreciation expense 7.5
Water and electricity costs 40 (253.5)
Net profit for the current period $727
Other consolidated gains and
0
losses
Total consolidated profit and
$727
(6) Table of changes in equity
Dawei Company
March 31, ×
Retain the
share capital Total equity
surplus
Opening balance $950 $105 $1,055
Net profit for the － 727 727
current period
The balance at the $950 $832 $1,782
end of the period
(7) Balance sheet
Dawei Company
balance sheet
44
31 December ×
asset liability
cash $829.5 accounts payable $370
accounts receivable 840 Notes payable 350
stocks 380 Utilities payable 10
Office supplies 20 Total current liabilities $730
Prepaid rent 10 Non-current liabilities $880
Total current assets $2079.5 Total liabilities $1,610
Real estate, plant and Rights
equipment
land $900 share capital $950
equipment $600 Retain the surplus 832
Reduction: Accumulated (187.5) 412.5 Total equity $1,782
depreciation - equipment
Total real estate, plant and $1312.5 Total liabilities and $3,392
equipment equity
Total assets $3392.0
(8) Check out the entries and post them
Sales 1,668

Discount 7.5
The cost of goods sold is 455
Payroll fee 120
45
inventory system 45
Supplies cost 46
Depreciation expense 7.5
Water and electricity costs 40

Retained surplus 727

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5Accounting and inventory

Chapter accounting in the buying and

Questions and Answers

2 . What is a perpetual inventory system for inventory?

3 . What is point-of-shipment delivery and destination delivery?

4 . What account is classified as a return and discount account?

6 . Credit memos are generally issued in which of the following situations?

9 . What assets are inventory classified as in a classified balance sheet?

origin and payment terms of 2/10, n/30.

10/13 Clear all payments from Xiaojin.

The relevant entries of Ozu Company.

10/1 Inventory 20,000

10/3 Accounts receivable 15,000

The cost of selling goods is 8,000

10/5 Freight charges 500

10/7 Accounts payable 1,000

10/9 Accounts payable 19,000

10/11 Return and discount 2,000

10/13 Cash 12,870

10/17 Stock 30,000

10/20 Stock 800

10/25 Accounts receivable 25,000

The cost of selling goods is 13,000

10/28 Return and discount 3,000

The cost of selling goods is 1,600

10/31 Accounts payable 30,000

6/2 Inventory 43,000

6/7 Accounts payable 5,000

6/8 Stock 600

6/9 Accounts receivable 78,000

Sales revenue of 78,000

The cost of selling goods is 44,000

6/11 Accounts payable 38,000

6/16 Return and discount 16,000

6/23 Cash 60,760

Cash $200 equity $510

Supplies $10 sold for $0

Land $400 sales discount $0

Accumulated depreciation - $100 for equipment rental expenses $0

Accounts payable $140 payroll costs $0

Long-term mortgage payable $200 depreciation charge $0

The × 1 year deal is summarized as follows:

1. Supplies are still $10 unspent.

(1) Make entries and record them in the journal.

(3) Adjust entries and postings.

(a) Stock 150

(b) Accounts payable 15

(c) Inventory 29.7

(d) Accounts payable 135

(e) Cash 200

Cost of goods sold 180

(f) Return and discount of 30

(h) Cash 388

(i) Stock 120

(j) Payroll costs 40

(k) Cash 600

Cost of goods sold 120

(l) Accounts payable 150

cash accounts receivable

The 200 (a) 10 The 150 (f ) 30

(e) 200 (c) 29.7 (e) 700 (h) 400

(h) 388 (d) 132.3 420

(k) 600 (g) 15