Question

Exercise 4-4A Recording inventory transactions in the general journal and posting entries to T-accounts: Perpetual system LO 4-1 Milo Clothing experienced the following events during 2016, its first year of operation: 1. Acquired $12,000 cash from the issue of common stock. 2. Purchased inventory for $5,600 cash. 3. Sold inventory costing $3,360 for $5,712 cash. 4. Paid $650 for advertising expense. Required a. Record the general journal entries for the preceding transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Answer:

Required a. Record the general journal entries for the preceding transactions:

cash            12,000 debit

   common stock               12,000 credit

--to record issuance of stocks --

inventory          5,600 debit

         cash                       5,600 credit

-- to record purhcase of inventory--

cash              5,712 debit

    sales revenue          5,712 credit

COGS           3,360 debit

    Invenotry                 3,360 credit

--to record sale and subsequent cost--

advertizing expense   650 debit

                     cash                            650 credit

Explanation:

We will post baed on the accounting principles:

debit = creidt

1)we debit cash and credit how we obtain the cash

2) we debit inventory and credit cash which is how we acquire the inventory (if it was o naccount it will be account payable)

3) we recognize the gain and the cash which was obtain for it.

also we recognize the expenses, which are the cost of the goods used so decrease inventory

4) we recognize the expense and decrease the cash used to pay for it.