At December 31, 2009, ABC company's inventory amounted to Rs. 44000- Jan 3, sold goods to ZEF Company for Rs. 20000 -

Question

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.

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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.

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At December 31, 2009, ABC company's inventory amounted to Rs

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Archived Solution

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)

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

Beginning inventory	44,000
add: purchases	9,800
less: closing inventory (from b)	(42,600)
Cost of goods sold	Rs.11,200.