Question

A merchandiser is a business that sells merchandise, or goods, to customers. There are two main types of inventory accounting systems that are used by merchandisers, periodic and perpetual. Each person choose one transaction and show how it is recorded in a perpetual inventory system.
1. Purchase of $23,800 in merchandise inventory on account with terms 2/15, n/30, FOB shipping point
2. The company pays freight of $50
3. The company returns $5,200 of the merchandise due to damage during shipment.
4. The company paid the amount due less the return and discount (within the discount period).

Answer 1

Answer:

a. Feb. 2

Dr Merchandise Inventory $23,800

Cr Accounts Payable $23,800

4 Dr Merchandise Inventory $50

Cr Cash $50

9 Dr Accounts Payable $5,200

Cr Merchandise Inventory $5,200

14 Dr Accounts Payable $18,600

Cr Cash $18,228

Cr Merchandise Inventory $372

2. Inventory cost $18,278

Explanation:

a. Preparation of the journal entries

Feb. 2

Dr Merchandise Inventory $23,800

Cr Accounts Payable $23,800

4 Dr Merchandise Inventory $50

Cr Cash $50

9 Dr Accounts Payable $5,200

Cr Merchandise Inventory $5,200

14 Dr Accounts Payable $18,600

($23,800 − $5,200)

Cr Cash $18,228

($18,600 – $372)

Cr Merchandise Inventory $372

($18,600 × 0.02)

2. Calculation to determine how much did the inventory cost Burlington Drug Store

Inventory cost =($23,800 + $50 – $5,200 – $372)

Inventory cost =$18,278

Therefore how much did the inventory cost Burlington Drug Store is $18,278