Question

James Company began the month of October with inventory of $32,000. The following inventory transactions occurred during the month:
a. The company purchased merchandise on account for $47,500 on October 12. Terms of the purchase were 1/10, n/30. James uses the net method to record purchases. The merchandise was shipped f.o.
b. shipping point and freight charges of $670 were paid in cash. b. On October 31, James paid for the merchandise purchased on October 12
c. During October merchandise costing $20,550 was sold on account for $31,400.
d. It was determined that inventory on hand at the end of October cost $59,145


Assuming that the James Company uses a periodic inventory system, prepare journal entries for the above transactions including the adjusting entry at the end of October to record cost of goods sold. James considers purchase discounts lost as part of interest expense. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Explanation:

The journal entries are shown below:

On October 12

Purchases ($47,500 x 0.99) $47,025

            To Account Payable  $47,025

(Being the purchase of merchandise is recorded)  

On October 12

Freight In $670  

         To Cash  $670

(Being the freight charges is recorded)  

On October 31

Account Payable $47,025  

              To Interest Expense $475

              To Cash  $47,500

(Being the payment for purchases is recorded)  

Account Receivable $31,400  

            to Sales Revenue  $31,400

(To record the sales on account)

On October 31  

Cost of Goods Sold $20,550  

Ending Inventory  $59,145

          To Beginning Inventory   $32,000

          To Purchases  $47,025

           To Freight In  $670

(Being recording the adjusting entry is made)