Question

ed that their EOQ is 500 units. Normal demand is 3,125 units a year. Given that the cost to place an order is $10 and the cost to carry a single unit in inventory is $.025 what are the total ordering and carrying costs for the year? 2. a. How is a reorder point different from an economic order quantity? b. How would a reorder point be used in conjunction with an EOQ? 3. Utilize the following events to: A. Record the general journal entries for each event assuming a Perpetual System. B. Set up the following T-accounts: Cash (assume a $40,000 beginning balance), Inventory, Purchases, Cost of Goods Sold and Sales Revenue. Then post from your general journal entries in A. above to these accounts. C. Prepare a short Income Statement and Balance Sheet. See Class Packet page 8-7 for an example of how to complete the assignment. Events: a. Telly Vision purchases 50 big screen sets for resale to his customers at a cost of $600 each paying cash for the sets. b. Telly Vision sells 35 of the sets for $800 each to customers for cash (you will need both a revenue entry and an expense entry under the perpetual system). c. Telly Vision counts his inventory, revealing a total of 14 sets in stock. 4. Utilize the following events to: A. Record the general journal entries for each event assuming a Periodic System. B.Set up the following T-accounts: Cash (assume a $40,000 beginning balance), Inventory, Purchases, Cost of Goods Sold and Sales Revenue. Then post from your general journal entries in A. above to these accounts. G Prepare a short Income Statement and Balance Sheet. f& for an idea on how to complete the assignment

just need help with question 3 please thanks

Answer 1

Answer to Question 3:

Under Perpetual inventory System, Inventory gets accounted for every purchase unlike Periodic inventory system, where purchase account will be used to account inventory purchase.

Similarly, COGS gets accounted on every sale under Perpetual inventory system and COGS will get accounted as part of closing entries under periodic inventory system.

A. Journal Entries for said events:

Reference	Dr / Cr	Account title	Debit	Credit
a.	Dr	Merchandise Inventory	30,000
	Cr	Cash		30,000
		(To record purchase of 50 big screen sets @ $ 600 EA)
b.	Dr	Cash	28,000
	Cr	Sales Revenue		28,000
		(To record sale of 35 big screen sets @ $ 800 EA)
b.	Dr	Cost of Goods Sold	21,000
	Cr	Merchandise Inventory		21,000
		(To Record COGS of 35 big screensets @ $ 600 EA)
c.	Dr	Cost of Goods Sold	600
	Cr	Merchandise Inventory		600
		(To record difference in physical inventory count -Purchases minus sales minus physical inventory = 50-35-14=1 unit @ $600 EA)

B. Journal Posting to T-Accounts:

Cash
Date	Account title	Dr	Date	Account title	Cr
	Balance c/d	40,000		By Merchandise Inventory	30,000
	To Sales Revenue	28,000
				By Balance c/f	38,000
		68,000			68,000
	To Balance C/d	38,000
Merchandise Inventory
Date	Account title	Dr	Date	Account title	Cr
	Balance c/d	-		By Cost of Goods Sold	21,000
	To Cash	30,000		By Cost of Goods Sold	600
				By Balance c/f	8,400
		30,000			30,000
	To Balance C/d	8,400
Purchases
Date	Account title	Dr	Date	Account title	Cr
				Balance transfer to Income Statement
		-			-
		-
Cost of Goods Sold
Date	Account title	Dr	Date	Account title	Cr
	To Merchandise Inventory	21,000
	To Merchandise Inventory	600
				Balance transfer to Income Statement	21,600
		21,600			21,600
Sales Revenue
Date	Account title	Dr	Date	Account title	Cr
				By Cash	28,000
	Balance transfer to Income Statement	28,000
		28,000			28,000

C. Income Statement and Balance Sheet:

Income Statement
Sales Revenue	28,000	A
Less: Cost of Goods Sold	21,600	B
Gross Profit	6,400	A-B
Balance Sheet
Current Assets:
Cash	38,000
Inventory	8,400
	46,400
Other Assets (fixed Asset,Investments):
Not Available
Total Assets	46,400	A
Liabilities & Equity:
Liabilities:
Not Available
Equity:
Common Stock
Retained Earnings	6,400
Total Liabilities & Equity	6,400	B
Difference between Liabilities & Assets comes from opening balance of cash	40,000	A-B