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James Company began the month of October with inventory of $16,000. The following inventory transactions occurred during the month:

1. The company purchased merchandise on account for $23,500 on October 12. Terms of the purchase were 2/10, n/30. James uses the net method to record purchases. The merchandise was shipped f.o.b. shipping point and freight charges of $510 were paid in cash.
2. On October 31, James paid for the merchandise purchased on October 12.
3. During October merchandise costing $18,150 was sold on account for $28,200.
4. It was determined that inventory on hand at the end of October cost $21,390.

2. Assuming that the James Company uses a periodic inventory system, prepare journal entries for the above transactions including the adjusting entry at the end of October to record cost of goods sold. James considers purchase discounts lost as part of interest expense. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

SOLUTION

Date	Accounts titles and Explanation	Debit ($)	Credit ($)
October 12	Purchases	23,030
	Account Payable (23,500*98%)		23,030
	(To record the purchase of merchandise)
October 12	Freight In	510
	Cash		510
	(To record the freight charges)
October 31	Account Payable	23,030
	Interest Expense	470
	Cash		23,500
	(To record the payment for purchases)
October	Account Receivable	28,200
	Sales Revenue		28,200
	(To record the sales on account)
	No journal entry required
	(No entry required for cost of goods sold under periodic method)
October 31	Cost of Goods Sold	18,150
	Inventory (Ending)	21,390
	Inventory (Beginning)		16,000
	Purchases		23,030
	Freight In		510
	(To record the adjusting entry)