Question

Required information [The following information applies to the questions displayed below.] James Company began the month of October with inventory of $32,000. The following inventory transactions occurred during the month: a. The company purchased merchandise on account for $47,500 on October 12. Terms of the purchase were 1/10, n/30. James uses the net method to record purchases. The merchandise was shipped f.o.b. shipping point and freight charges of $670 were paid in cash. b. On October 31, James paid for the merchandise purchased on October 12. c. During October merchandise costing $20,550 was sold on account for $31,400. d. It was determined that inventory on hand at the end of October cost $59,145. 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.)

• The company purchased merchandise on account for $47,500 on October 12. Terms of the purchase were 1/10, n/30. James uses the net method to record purchases.
• The merchandise was shipped f.o.b. shipping point and freight charges of $670 were paid in cash.
• On October 31, James paid for the merchandise purchased on October 12.
• Record the sale of merchandise on account.
• Record the cost of goods sold.
• Record any necessary adjusting entry when the inventory on hand at the end of October cost $59,145.

Answer 1

Journal entries under perpetual inventory system:

2)	Date	Accounts Titles and Explanations	Debit	Credit
a)	Oct. 12	Merchandise Inventory	$47,500
		Accounts Payable		$47,500
		(To record the purchase of merchandise inventory on account)
	Oct. 12	Freight Charges	$670
		Cash		$670
		(To record the payment of freight charges)
b)	Oct. 31	Accounts Payable	$47,500
		Discount Received ($47,500*1/100)		$475
		Cash ($47,500 - $475)		$47,025
		(To record payment for materials purchased on account)
c)	October	Accounts Receivable	$31,400
		Sales Revenue		$31,400
		(To record sales on account)
		Cost of Goods Sold	$20,550
		Merchandise Inventory		$20,550
		(To record cost of goods sold)
d)	October	Merchandise Inventory	$59,145
		Income Summary		$59,145
		(To record the adjusting entry for ending inventory)