control account, subsidiary ledgers, closing entries, inventory systems

control account, subsidiary ledgers, closin" rel="nofollow">ing entries, in" rel="nofollow">inventory systems Assignment Question 2 Sample Assume that Musonda’s Markets had an in" rel="nofollow">inventory balance of $13 860 at the close of the last accountin" rel="nofollow">ing period. The followin" rel="nofollow">ing sales and purchase transactions are for the current period: 1. Purchased goods on account for $11 570. 2. Returned part of the above purchase that had an origin" rel="nofollow">inal purchase price of $670. 3. Paid for the balance of the purchase in" rel="nofollow">in time to receive a discount of 1% of the purchase price. 4. Sold goods costin" rel="nofollow">ing $10 600 for $21 200. Cash of $9800 was received, with the balance due on account. 5. Goods sold on credit for $860 (cost $430) were returned. Required A. In two columns, prepare general journal entries (ignorin" rel="nofollow">ing GST) assumin" rel="nofollow">ing: 1. a periodic in" rel="nofollow">inventory system is used 2. a perpetual in" rel="nofollow">inventory system is used. B. Same as for requirement A, except that GST is to be added to the figures where appropriate. C. Suppose that a physical count of the in" rel="nofollow">inventory at the end of the current period shows in" rel="nofollow">inventory of $13 200 to be on hand. Present the entries (if any) required under each in" rel="nofollow">inventory system to adjust for any discrepancy. D. Comment on which system would best disclose any discrepancy. Solution Journal entries – perpetual and periodic in" rel="nofollow">inventory systems MUSONDA’S MARKETS Required: A. In two columns, prepare general journal entries assumin" rel="nofollow">ing: 1. a periodic in" rel="nofollow">inventory system is used. 2. a perpetual in" rel="nofollow">inventory system is used. B. Repeat requirement A assumin" rel="nofollow">ing GST is to be added to the figures where appropriate. C. Suppose that a physical count of the in" rel="nofollow">inventory at the end of the current period shows in" rel="nofollow">inventory of $13 200 to be on hand. Present the entries (if any) required under each in" rel="nofollow">inventory system to adjust for any discrepancy. D. Comment on which system would best disclose any discrepancy. A. (without GST) MUSONDA’S MARKETS Periodic Perpetual 1. Purchases 11 570 Inventory 11 570 Accounts Payable 11 570 Accounts Payable 11 570 2. Accounts Payable 670 Accounts Payable 670 Purchases Returns & Allows. 670 Inventory 670 3. Accounts Payable 10 900 Accounts Payable 10 900 Discount Received 109 Discount Received 109 Cash at Bank 10 791 Cash at Bank 10791 4. Cash 9 800 Cash 9 800 Accounts Receivable 11 400 Accounts Receivable 11 400 Sales 21 200 Sales 21 200 Cost of Sales 10 600 Inventory 10 600 5. Sales Returns & Allows 860 Sales Returns & Allows 860 Accounts Receivable 860 Accounts Receivable 860 Inventory 430 Cost of Sales 430 B. (with GST) MUSONDA’S MARKETS Periodic Perpetual 1. Purchases 11 570 Inventory 11 570 GST Outlays 1 157 GST Outlays 1 157 Accounts Payable 12 727 Accounts Payable 12 727 2. Accounts Payable 737 Accounts Payable 737 Purchases Rtns & Allows. 670 Inventory 670 GST Outlays 67 GST Outlays 67 3. Accounts Payable 11 990 Accounts Payable 11 990 Discount Received 109 Discount Received 109 GST Outlays 10.90 GST Outlays 10.90 Cash at Bank 11 870.10 Cash at Bank 11 870.10 4. Cash 9 800 Cash 9 800 Accounts Receivable 13 520 Accounts Receivable 13 520 Sales 21 200 Sales 21 200 GST Collections 2 120 GST Collections 2 120 Cost of Sales 10 600 Inventory 10 600 5. Sales Returns & Allowances 860 Sales Rtns & Allows 860 GST Collections 86 GST Collections 86 Accounts Receivable 946 Accounts Receivable 946 Inventory 430 Cost of Sales 430 C. MUSONDA’S MARKETS Periodic Perpetual Physical count at period end $13 200 Inventory balance Perpetual System $14 590 No entry required under periodic system. Inventory loss in" rel="nofollow">included in" rel="nofollow">in calculation of Cost of Sales. $13860(balance) + $11570(purchase) - $670(return) - $10600(sale) + $430(sale return) = $14 590 Inventory Shortage Expense 1 390 Inventory 1 390 Inventory loss $14 590 - $13 200 = $1390 D. The perpetual in" rel="nofollow">inventory system is the only system which can identify in" rel="nofollow">inventory discrepancies. This system main" rel="nofollow">intain" rel="nofollow">ins an accurate record of how many in" rel="nofollow">inventory units should be on hand at any one time. The system can then identify any discrepancy between recorded in" rel="nofollow">inventory balances and the stocktake or physical count of in" rel="nofollow">inventory numbers. In this case the in" rel="nofollow">inventory shortage amount of $1 390 is significant and the owner of the busin" rel="nofollow">iness needs to in" rel="nofollow">investigate the cause. Is it theft? Is the in" rel="nofollow">inventory bein" rel="nofollow">ing discarded because it has perished? Is it a combin" rel="nofollow">ination of factors? What can be done about it?