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Homework answers / question archive / At December 31, 2009, ABC company's inventory amounted to Rs
At December 31, 2009, ABC company's inventory amounted to Rs. 44000- Jan 3, sold goods to ZEF Company for Rs. 20000 - cash. The cost of the same was Rs. 11200/- • Jan 7, purchased goods at the cost of Rs. 10000; terms 2/10, 1/30. ABC Company, records purchases at net cost. Instructions: a) Prepare Journal entries, if ABC Company uses a perpetual inventory system. b) Compute the balance in the inventory control account at January 7. c) Prepare Journal entries, if ABC company uses a periodic inventory system d) Compute the Cost of Goods sold for first week of January, assuming use of the periodic system. As the amount of ending inventory, use your answer to part b.
a.
Journal entries:
| Date | Accounts | Debit (Rs) | Credit (Rs) |
| Jan 3 | Cash | 20,000 | |
| Sales revenue | 20,000 | ||
| Jan 3 | Cost of goods sold | 11,200 | |
| Merchandise inventory | 11,200 | ||
| Jan 7 | Merchandise inventory | 9800 | |
| Accounts payable | 9800 | ||
| (note: since the terms are 2/10, 2% discount will be available, so amount = Rs10,000 - (2%*10,000)=>Rs9800) | |||
b.
Balance in inventory account at January 7:
| Opening balance of inventory | Rs.44,000 |
| add:purchases | 9,800 |
| less: cost of goods sold | 11,200 |
| Balance in inventory account at January 7 | Rs42,600 |
c. Journal entries, using a periodic inventory system:
| Date | Accounts | Debit (rs) | Credit (rs) |
| Jan 3 | Cash | 20,000 | |
| Sales revenue | 20,000 | ||
| Jan 7 | Purchases | 9800 | |
| Accounts payable | 9800 | ||
d.
computation of cost of goods sold under periodic inventory system:
| Beginning inventory | 44,000 |
| add: purchases | 9,800 |
| less: closing inventory (from b) | (42,600) |
| Cost of goods sold | Rs.11,200. |
