Journalize the following merchandising transactions for CSI Systems assuming it uses (a) a periodic
Inventory system and (b) a perpetual inventory system.
1. On November 1, CSI Systems purchases merchandise for $1,400 on credit with terms of 2
5,
n
30, FOB shipping point; invoice dated November 1.
2. On November 5, CSI Systems pays cash for the November 1 purchase.
3. On November 7, CSI Systems discovers and returns $100 of defective merchandise purchased on
November 1 for a cash refund.
4. On November 10, CSI Systems pays $80 cash for transportation costs with the November 1 purchase.
5. On November 13, CSI Systems sells merchandise for $1,500 on credit. The cost of the merchandise
Is $750.
6. On November 16, the customer returns merchandise from the November 13 transaction. The returned
Items sell for $200 and cost $100.

For my answer I have
(a) a periodic inventory system

1. On November 1, CSI Systems purchases merchandise for $1,400 on credit with terms of 2/5, n/30, FOB shipping point; invoice dated November 1
Dr Purchases $1,400
Cr Accounts payable $1,400

2. On November 5, CSI Systems pays cash for the November 1 purchase
Dr Accounts payable $1,400
Cr Purchase discounts $28
Cr Cash $1,372

3. On November 7, CSI Systems discovers and returns $100 of defective merchandise purchased on November 1 for a cash refund
Dr Cash $98
Dr Purchase discounts $2
Cr Purchases $100

4. On November 10, CSI Systems pays $80 cash for transportation costs with the November 1 purchase
Dr Freight-in $80
Cr Cash $80

5. On November 13, CSI Systems sells merchandise for $1,500 on credit. The cost of the merchandise is $750
Dr Accounts receivable $1,500
Cr Sales $1,500

6. On November 16, the customer returns merchandise from the November 13 transaction. The returned items sell for $200 and cost $100
Dr Sales returns & allowances $200
Cr Accounts receivable $200

(b) a perpetual inventory system

1. On November 1, CSI Systems purchases merchandise for $1,400 on credit with terms of 2/5, n/30, FOB shipping point; invoice dated November 1
Dr Merchandise inventory $1,400
Cr Accounts payable $1,400

2. On November 5, CSI Systems pays cash for the November 1 purchase
Dr Accounts payable $1,400
Cr Merchandise inventory $28
Cr Cash $1,372

3. On November 7, CSI Systems discovers and returns $100 of defective merchandise purchased on November 1 for a cash refund
Dr Cash $98
Cr Merchandise inventory $100

4. On November 10, CSI Systems pays $80 cash for transportation costs with the November 1 purchase
Dr Merchandise inventory $80
Cr Cash $80

5. On November 13, CSI Systems sells merchandise for $1,500 on credit. The cost of the merchandise is $750
Dr Accounts receivable $1,500
Cr Sales $1,500

Dr COGS $750
Cr Merchandise inventory $750

6. On November 16, the customer returns merchandise from the November 13 transaction. The returned items sell for $200 and cost $100
Dr Sales returns & allowances $200
Cr Accounts receivable $200

Dr Merchandise inventory $100
Cr COGS $100

#3 for perpetual, the inventory would be $98 as well. Remember that you can never have an entry that doesn't balance.

Otherwise, it's all correct. Good job! Difficult to learn both methods at the same time.

Quote:

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Originally Posted by morgaine300

#3 for perpetual, the inventory would be $98 as well. Remember that you can never have an entry that doesn't balance.

Otherwise, it's all correct. Good job! Difficult to learn both methods at the same time.

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The purchases were recorded at full price, hence the credit is correctly recorded for the full price of $100. The difference of $2 represents purchase discounts. The entry is:

Debit Cash 98
Debit Purchase discounts 2
Credit Merchandise Inventory 100

The inventory was already paid for and the discount already removed from inventory, meaning the net cost of the inventory is now in inventory at 98.

Quote:

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Originally Posted by morgaine300

The inventory was already paid for and the discount already removed from inventory, meaning the net cost of the inventory is now in inventory at 98.

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Sorry, did not notice the entry of November 5. I stand corrected

Well, if you'd sit at the computer instead of standing... :-)