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    kendu2006's Avatar
    kendu2006 Posts: 3, Reputation: 1
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    #1

    Dec 21, 2006, 06:53 PM
    Periodic and perpetual systems
    Hello,

    Please help, I have a quiz and I don't understand.

    Journalize the following merchandising transactions for TCI assuming it uses (a) a periodic inventory system and (b) a perpetual inventory system. Prepare journal entries for both periodic and perpetual system.

    1. on nov 1, TCI purchases merchandise for 1400 on credit with terms 2/5, n/30, FOB shipping point; invoice dated November 1.

    2. On November 5, TCI pays cash for Novenber 1 purchase.

    3. On November 7, TCI discovers and returns $100 of defective merchandise purchased on November 1 for a cash refund.

    4. On November 10, TCI pays $ 80 cash for transportation costs with the November 1 purchase.

    5. On November 13, TCI sells merchandise for 1,500 on credit. The cost of the merchdise is 750.

    6. On November 16, the customer returns merchandise from the November 13 transaction. The returned items sell for 200 and cost 100.

    Thank you for all your help! Please Help!
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
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    #2

    Dec 21, 2006, 11:22 PM
    The following website explains quite nicely the difference between Perpetual vs. Periodic Inventory System Journal Entries

    http://ccba.jsu.edu/accounting/PERPETUALPERIODICJE.HTML
    kendu2006's Avatar
    kendu2006 Posts: 3, Reputation: 1
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    #3

    Dec 28, 2006, 05:46 PM
    CaptainForest
    Thanks for the link, I am still not sure but here is what I have.

    Nov 1
    $1320 debit
    $ 80 Freight in expense

    Nov 5
    $1400 debit
    $1400 AP cash credit

    Nov 7
    $100 credit
    $100 AR

    Nov 10
    $ 80 debit
    AP $ 80

    Nov 13
    $750 credit
    $750 AR

    Nov 16
    $100 credit
    $100 AR


    Please help and let me know if correct. Thanks a million. Happy Holidays
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
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    #4

    Dec 28, 2006, 10:49 PM
    1. on nov 1, TCI purchases merchandise for 1400 on credit with terms 2/5, n/30, FOB shipping point; invoice dated November 1.

    (a) a periodic inventory system
    Dr. Purchases 1,400
    Cr. AP 1,400

    Also (see transaction 4 for more information):
    Dr. Freight-in Expense 80
    Cr. AP 80

    (b) a perpetual inventory system
    Dr. Inventory 1,400
    Cr. AP 1,400

    Also (see transaction 4 for more information):
    Dr. Freight-in Expense 80
    Cr. AP 80


    2. On November 5, TCI pays cash for Novenber 1 purchase.

    (a) a periodic inventory system
    Dr. AP 1,400
    Cr. Cash 1,372
    Cr. Purchase Discount 28

    1,400 less 2% = 1,400 x .98 = 1,372

    (b) a perpetual inventory system
    Dr. AP 1,400
    Cr. Cash 1,372
    Cr. Inventory 28


    3. On November 7, TCI discovers and returns $100 of defective merchandise purchased on November 1 for a cash refund.

    (a) a periodic inventory system
    Dr. Cash 100
    Cr. Purchase Returns & Allowance 100

    (b) a perpetual inventory system
    Dr. Cash 100
    Cr. Inventory 100


    4. On November 10, TCI pays $ 80 cash for transportation costs with the November 1 purchase.

    (a) a periodic inventory system
    Dr. AP 80
    Cr. Cash 80

    (b) a perpetual inventory system
    Dr. AP 80
    Cr. Cash 80


    5. On November 13, TCI sells merchandise for 1,500 on credit. The cost of the merchdise is 750.

    (a) a periodic inventory system
    Dr. AR 1,500
    Cr. Sales 1,500

    (b) a perpetual inventory system
    Dr. AR 1,500
    Cr. Sales 1,500

    Dr. COGS 750
    Cr. Inventory 750


    6. On November 16, the customer returns merchandise from the November 13 transaction. The returned items sell for 200 and cost 100.

    (a) a periodic inventory system
    Dr. Sales Returns and Allowances 200
    Cr. AR 200

    (b) a perpetual inventory system
    Dr. Sales Returns and Allowances 200
    Cr. AR 200

    Dr. Inventory 100
    Cr. COGS 100
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
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    #5

    Dec 29, 2006, 10:48 PM
    kendu2006 agrees: Thanks so much I think I got it now, you should be a teacher, if you aren't already.
    You're welcome.
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