Question

Accounting records for Eastern Tire Ltd. yield the following data for the year ended December 31 2017

Accounting records for Eastern Tire Lid. yield the following data for the year ended December 31, 2017 (ar cunts in the sands) (Click the icon to view the accounting records.) Requirements 1. Joumalize Eastem Tire's inventory transactions for the year under (a) perpetual system and (b) the periodic system. Show all amounts in thousands. 2. What differences do you notice in the journal entries between the perpetual system and the periodic system? 3. Report ending inventory, sales, cost of goods sold, and grass profit on the appropriate financial statement (amounts in thousands), assuming the perpetual inventory system is used. Requirement 1a. Journalize Eastern Tire's inventory transactions for the year under the perpetual system. (Record debits first, then credits. Explanations are not required. Show all amounts in thousands.) The first transaction is the purchase of inventory. Record the entry Joumal Entry Date Accounts December 31 Debit Credit Accounting records (Amounts in thousands) Inventary, December 31, 2018............ Purchases of inventory on account)............... Sales of inventory - 75% on account, 25% for cash (cost $1,530) ....... Inventory at FIFO, December 31, 2017................. .. 530 1,900 2.100 The next transaction is the sale of inventory. Record the entry. (Do not yet record the cost related to the sale. We do this in the next journal entry.) Journal Entry Date Account Debit Credit 900 December 31 Duint Done The last entry is recording the cost of Inventory. Record the entry. Journal Entry Date Accounts December 31 Debit Credit

Answer 1

1a.	Date	Accounts					Debit	Credit
	Dec 31.	Inventory					1900
		Accounts payable						1900
		(Purchase of inventory)
	Dec 31.	Cash			(2100*25%)		525
		Accounts receivable			(2100*75%)		1575
		Sales revenue						2100
		(Sale of inventory)
	Dec 31.	Cost of goods sold					1530
		Inventory						1530
		(Cost of inventory)
1b.	Date	Accounts					Debit	Credit
	Dec 31.	Purchases					1900
		Accounts payable						1900
		(Purchase of inventory)
	Dec 31.	Cash			(2100*25%)		525
		Accounts receivable			(2100*75%)		1575
		Sales revenue						2100
		(Sale of inventory)
2	Purchase of inventory-the perpetual system uses the inventory account while the periodic system uses a purchases account.Sale of inventory-the perpetual system records two journal entries,
	one to record the sales and one to update the inventory records while the periodic system only records the sales.
3		Balance sheet
				$
	Current assets:
	Inventory			900
		Income statement
				$
	Sales			2100
	Less: Cost of goods sold			1530
	Gross profit			570