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Journal Entries - Perpetual Inventory

This information relates to Sherper Co.

1) On April 5 purchased merchandise from Newport Co. for $22,000, terms 2/10, n/30

2) On April 6 paid freight costs of $900 on merchandise purchased from Newport Co.

3) On April 7 purchased equipment on account for 26,000.

4) On April 8 returned some of April 5 merchandise to newport Co. which costs 3,600.

5) On April 15 paid the amount due to Newport Co. in full.

A) prepare the journal entries to record the transactions listed above on the books of Sherper Co. Sherper uses a perpetual inventory system.

B) Assume that Sherper Co. paid the balance due to Newport Co. on May 4 instead of April 15; prepare the journal entry to record this payment.

Solution Preview

The journal entries are below. In a perpetual system, all transactions related to inventory are recorded in the merchandise inventory account.

1) On April 5 purchased merchandise from Newport Co. for $22,000, terms 2/10, n/30

Merchandise Inventory Dr 22,000
Accounts Payable Cr 22,000

2) On April 6 paid freight costs of $900 on merchandise purchased from Newport Co.

The freight ...

Solution Summary

The solution explains how to record the journal entries under the perpetual inventory method

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