Question

Accounting records for Ontario Tire Ltd. yield the following data for the year ended December 31, 2017 (amounts in thousands): (Click the icon to view the accounting records.) Requirements 1. Journalize Ontario 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 gross profit on the appropriate financial statement (amounts in thousands), assuming the perpetual inventory system is used. Requirement 1a. Journalize Ontario 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. Journal Entry Date Accounts December 31 Debit Credit 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 Accounts Debit Credit Date December 31 The last entry is recording the cost of inventory. Record the entry. Journal Entry Date Accounts December 31 Debit Credit

Answer 1

Answer is given below

Credit Debit $1,100 Date Account title and explanation December 31 Merchandise inventory To Accounts payable (To record inventory purchase) $1,100 $1,638 $462 December 31 Accounts Receivable Cash To Sales (To record sales) $2,100 $820 December 31 Cost of Goods sold To Merchandise inventory (To record Cost of goods sold) Date Account title and explanation December 31 Purchase To Accounts payable (To record inventory purchase) Debit | Credit $1,100 $1,100 $1,638 $462 December 31 Accounts Receivable Cash To Sales (To record sales) $2,100 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 sale and the one to update the inventory records while the periodic system only records the sales

Balance Sheet Current Assets Accounts Receivable Inventory $1,638 $870 Income Statement Sales Cost of goods sold Gross profit $2,100 $820 $1,280