Question

Barrington company began the year with inventory of $100,000. during the year, the company purchased inventory in the amount of $750,000. sales revenue for the year totaled $800,000. a physical count determined the cost of inventory at the end of the year to be $90,000. the adjusting entry needed at the end of the year under a periodic inventory system includes a:

Answer 1

The above answer can be explained as under.

The total inventory of Barrington = Beginning Inventory + Purchases

Beginning Inventory = $ 100,000, Purchases = $ 750,000

Ending inventory = $ 90,000

Inventory consumed = total inventory of Barrington - Ending inventory = $ 750,000 - $ 90,000

Inventory consumed = $ 660,000

The journal entry to record inventory consumed -

Cost of goods sold ...... Dr.... $ 660,000

Merchandise Inventory.....Cr.... $ 660,000