Inventory Systems

Inventory Systems and Calculating Revenues, Expenses, and Income

Angela Allison

ACC/225

March 25, 2011

Jose Rodriguez

Inventory Systems and Calculating Revenues, Expenses, and Income

QS 5-8A

Identify whether each description best applies to a periodic or a perpetual inventory system.

a. Provides more timely information to managers. (Perpetual)

b. Requires an adjusting entry to record inventory shrinkage. (Periodic)

c. Markedly increased in frequency and popularity in business within the past decade. (Perpetual)

d. Records cost of goods sold each time a sales transaction occurs (Perpetual)

Exercise 5-9

a b c d e

Sales . . . . . . . . . . . . . . . . . . . . . . . . . $60,000 $42,500 $36,000 $78,000 $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 ?1,550 ?33,750 32,000 5,600

Merchandise inventory (ending) . . . . ?(7,950) (2,700) (9,000) (6,600) ?(2,560)

Cost of goods sold . . . . . . . . . . . . . . . $34,050 15,900 ?32,250 ?32,400 5,600

Gross profit . . . . . . . . . . . . . . . . . . . . .?25,950 ?26,600 3,750 45,600 ?18,000

Expenses . . . . . . . . . . . . . . . . . . . . . . .$9,000 10,650 12,150 2,600 6,000

Net income (loss) . . . . . . . . . . . . . . . . $16,950 $15,950 $(8,400) $43,000 $12,000

Exercise 5-13

Periodic Journal

2010

Nov 1 Purchases 1400

Accounts payable 1400

5 Accounts payable 1400

Purchase discounts 28

Cash 1372

7 Cash 100

Purchase returns and

Allowances 100

Accounts payable

10 Transportation 80

Cash 80

13 Accounts receivable 1500

Sales 1500

16 Sales returns and allowances 200

Accounts receivable 200

Perpetual Inventory Journal

1 Merchandise Inventory...