Question

Home Hardware reported beginning inventory of twenty two shovels, for a total cost of $110. The company had the following transactions during the month: Jan. 2 Sold 6 shovels on account at a selling price of $12 per unit 16 Sold 12 shovels on account at a selling price of $12 per unit 18 Bought 7 shovels on account at a cost of $5 per unit 19 Sold 11 shovels on account at a selling price of $12 per unit 24 Bought 12 shovels on account at a cost of $5 per unit 31 Counted inventory and determined that 9 units were on hand Required: 1. Prepare the journal entries that would be recorded using a periodic inventory system. (If no entry is required for a transaction/event, select "No journal entry required in the first account field.)

Answer 1

1)

Periodic Inventory System
Transaction	General Journal	Debit	Credit
Jan. 2	Accounts Receivable	$72
	Sales Revenue (6 shovels * $12 per unit)		$72
	(To record the sales made on account)
Jan. 16	Accounts Receivable	$144
	Sales Revenue (12 shovels * $12 per unit)		$144
	(To record the sales made on account)
Jan. 18	Purchases (7 shovels * $5 per unit)	$35
	Accounts Payable		$35
	(To record the purchase of merchanise inventory on account)
Jan. 19	Accounts Receivable	$132
	Sales Revenue (11 shovels * $12 per unit)		$132
	(To record the sales made on account)
Jan. 24	Purchases (12 shovels * $5 per unit)	$60
	Accounts Payable		$60
	(To record the purchase of merchanise inventory on account)
Jan. 31	Shrinkage Loss (22 - 6 - 12 + 7 - 11 + 12 = 12 - 9 = 3 * $5)	$15
	Purchases		$15
	(To record the shrinkage loss)
Jan. 31	Merchandise Invetory	$85
	purchases ($35 + $60 - $15)		$85
	(To record the adjusting entry to transfer amount from purchases to Merchandising Inventory)

2)

Perpetual Inventory System
Transaction	General Journal	Debit	Credit
Jan. 2	Accounts Receivable	$72
	Sales Revenue (6 shovels * $12 per unit)		$72
	(To record the sales made on account)
Jan. 16	Accounts Receivable	$144
	Sales Revenue (12 shovels * $12 per unit)		$144
	(To record the sales made on account)
Jan. 18	Merchandise Inventory (7 shovels * $5 per unit)	$35
	Accounts Payable		$35
	(To record the purchase of merchanise inventory on account)
Jan. 19	Accounts Receivable	$132
	Sales Revenue (11 shovels * $12 per unit)		$132
	(To record the sales made on account)
Jan. 24	Merchandise Inventory (12 shovels * $5 per unit)	$60
	Accounts Payable		$60
	(To record the purchase of merchanise inventory on account)
Jan. 31	Shrinkage Loss (22 - 6 - 12 + 7 - 11 + 12 = 12 - 9 = 3 * $5)	$15
	Merchandise Inventoy		$15
	(To record the shrinkage loss)

The dollar amount of shrinkage is $15 as per requirement 1.

The dollar amount of shrinkage is $15 as per requirement 2.