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Identify whether each description best applies to a periodic or a perpetual inventory system.
a. Provides more timely information to managers.
b. Requires an adjusting entry to record inventory shrinkage.
c. Markedly increased in frequency and popularity in business within the past decade.
d. Records cost of goods sold each time a sales transaction occurs.
Refer to QS 5-1 below and prepare journal entries to record each of the merchandising transactions assuming
That the periodic inventory system is used.
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QS 5-1
Recording purchases—
Perpetual system
P1
Prepare journal entries to record each of the following purchases transactions of a merchandising company.
Show supporting calculations and assume a perpetual inventory system.
Mar. 5 Purchased 500 units of product with a list price of $5 per unit. The purchaser is granted a
Trade discount of 20%; terms of the sale are 2_10, n_60; invoice is dated March 5.
Mar. 7 Returned 50 defective units from the March 5 purchase and received full credit.
Mar. 15 Paid the amount due from the March 5 purchase, less the return on March 7.
Part 2
Exercise 5-9
Calculating revenues, expenses,
And income
C1 C4
Fill in the blanks in the following separate income statements a through e. Identify any negative
Amount by putting it in parentheses.
A b c d e
Sales.. . $60,000 $42,500 $36,000 $ ? $23,600
Cost of goods sold
Merchandise inventory (beginning).. . 6,000 17,050 7,500 7,000 2,560
Total cost of merchandise purchases.. . 36,000? 32,000 5,600
Merchandise inventory (ending).. (2,700) (9,000) (6,600) ?
Cost of goods sold.. . 34,050 15,900? 5,600
Gross profit.. 3,750 45,600 ?
Expenses.. . 9,000 10,650 12,150 2,600 6,000
Net income (loss).. . $ ? $15,950 $ (8,400) $43,000 $ ?
Part 3
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.
