Inventories and Income Statements

Inventories and Income Statements - INVENTORIES AND INCOME...

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INVENTORIES AND INCOME STATEMENTS Lesson Eight
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INVENTORY TRANSACTIONS z Two methods: Perpetual Method Periodic Method
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PERPETUAL METHOD z Keeps constant track of Inventory, Cost of Goods Sold, and helps us compute theft. z More expensive because computers and better trained employees are needed.
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PERPETUAL METHOD Assume a beginning inventory of $30,000. a-Your store bought $10,000 in inventory, 2/10,n/30. Inventory 10000 Accounts Payable 10000
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PERPETUAL METHOD Inventory Dr | Cr Beg. 30000 | a 10000 | 40000
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PERPETUAL METHOD b-Your store returns $2,000 of the inventory to the supplier. Accounts Payable 2000 Inventory 2000
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PERPETUAL METHOD Inventory________ Dr | Cr Beg. 30000 | a 10000 |_____ 40000 | 2000 b 38000
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PERPETUAL METHOD c-Your store pays the bill within the discount period. Accounts Payable 8000 x.02 Discount 160 Net Due 7840
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PERPETUAL METHOD c- Accounts Payable 8000 Inventory 160 Cash 7840
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PERPETUAL METHOD Inventory________ Dr | Cr Beg. 30000 | a 10000 |_____ 40000 | 2000 b 38000 | 160 c 37840
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PERPETUAL METHOD d-If your store incurs the freight cost of a purchase : Inventory 300 Accounts Payable 300
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PERPETUAL METHOD Inventory____ Beginning Bal. 30000 | a 10000| 40000 | 2000 b 38000| 160 c 37840| d 300 | 38140|
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PERPETUAL METHOD e-Your store sells $5000 in merchandise inventory on account. The cost of the inventory was $3000. Accounts Receivable 5000 Sales 5000 Cost of Goods Sold 3000 Inventory 3000
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PERPETUAL METHOD ___________Inventory_______________ Current Bal 38140 | 3000 e 35140 | _______Cost of Goods Sold__________ e 3000 |
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PERPETUAL METHOD f- The customer returns $2000 of the inventory. The cost was $1200. Inventory 1200 Cost of Goods Sold 1200 Sales Returns and Allow 2000 Accounts Receivable 2000
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PERPETUAL METHOD Inventory___ 38140 | 3000 Cost of Goods Sold 35140 | E) 3000 | 1200 f f 1200 | 1800 36340
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PERPETUAL METHOD g)The customer paid the bill within the discount period.
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PERPETUAL METHOD Sale 5000 Sales Return 2000 3000 x.02 Sales Discount 60 Cash Due 2940
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PERPETUAL METHOD g) Cash 2940 Sales Discount 60 Accounts Receivable 3000
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PERPETUAL METHOD h-If your store pays the freight on a sale : Shipping Expense 200 Cash 200
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