Periodic versus Perpetual Entries
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#1 Please review illustration below (in attached file). Comparative Entries between these systems and state what the major difference is based on your observation.
(See attached file for data)
#2 On January 1, 2006, Phantom Company acquires $200,000 of Spiderman Products, Inc., 9% bonds at a price of $185,589. The interest is payable each December 31, and the bonds mature December 31, 2008. The investment will provide Phantom Company a 12% yield. The bonds are classified as held-to-maturity.
Prepare a three-year schedule of interest revenue and bond discount amortization, applying the effective-interest method.
#3 (Periodic versus Perpetual Entries) Fong Sai-Yuk Company sells one product. Presented below is information for January for Fong Sai-Yuk Company.
(See attached file for data)
Fong Sai-Yuk uses the FIFO cost flow assumption. All purchases and sales are on account.
Instructions
1. Assume Fong Sai-Yuk uses a periodic system. Prepare all necessary journal entries, including the end-of-month closing entry to record cost of goods sold. A physical count indicates that the ending inventory for January is 110 units.
2. Assume Fong Sai-Yuk uses a perpetual system. Prepare all necessary journal entries.
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Solution Summary
Periodic versus perpetual entries are examined. The major differences based on the observations are provided.
Solution Preview
See attached file for solution.
#1
Please review Illustration below. Comparative Entries between these systems and state what the major difference is based on your observation.
Perpetual Inventory System Periodic Inventory System
1. Beginning inventory, 100 units at $6:
The inventory account shows the inventory The inventory account shows the inventory
on hand at $600. on hand at $600.
2. Purchase 900 units at $6:
Inventory 5,400 Purchases 5,400
Accounts Payable 5,400 Accounts Payable 5,400
3. Sale of 600 units at $12:
Accounts Receivable 7,200 Accounts Receivable 7,200
Sales 7,200 Sales 7,200
Cost of Goods Sold 3,600 (No entry)
A: Beginning inventory = 100 units @ $6 = $600
B: Purchases = 900 ...
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