Question

Transactions are recorded immediately as they occur; records are kept “perpetually” up-to-date. When merchandise is sold,...

Transactions are recorded immediately as they occur; records are kept
“perpetually” up-to-date.
When merchandise is sold, two journal entries are necessary:

1.Recognize revenue earned based on the sales price of the merchandise.

2.Recognize the cost of goods sold and relieve the inventory account.

3 . Make the following journal entries for James Company under a Perpetual system.

a. On January 2nd, sold 2 bookcase for $1000 per unit on accounts to Raj Co.

b . On Feb. 1st, James Co. paid Ralph Co. $2500 for merchandise owed

c. On Feb. 15th, collected $1200 accounts receivable from Sam co.

d. On Feb. 28th, the company counts it;s inventory and discovered

a shortage of $200.

For example: Use this set up to make entries

Date General Journal Accounts Titles Debit Credit

a. Jan 2nd Dr Accounts Payable xxxxx

Cr Sales xxxxx

b. Feb. 1st DR?????

CR ????????

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Answer #1

For Inventory shortage, Cost of Goods sold can also be debited if amount is small.

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