Is an adjusting entry needed for inventory shrinkage when using the periodic inventory system? Explain.
No adjusting entry is passed for the inventory shrinkage.
In accounting, adjusting entries are the journal entries passed at the end of an accounting period to adjust the revenues and expenses in the period they occurred. Also, the adjusting entries are recorded after preparing the trial balance.
When the periodic inventory system is used, no adjusting entry is passed for the inventory shrinkage. Adjusting entry is not required because inventories are counted physically at the end of an accounting period. The physical count is recorded in the books of accounts under this system.
Journalize the following sales transactions for Sierra Tractors. Explanations are not required.
June 5 Sierra sold $20,000 of inventory on account, credit terms are 4/10, n/30. Cost of goods is $10,000. Sierra uses the gross method to record sales revenue.
12 Sierra receives payment from the customer on the amount due, less the discount.
Journalize the following transactions that occurred in January 2018 for Sylvia’s Amusements. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Sylvia estimates sales returns at the end of each month.
Jan. 4 Purchased merchandise inventory on account from Vanderbilt Company, $7,000. Terms 1/10, n/EOM, FOB shipping point.
6 Paid freight bill of $100 on January 4 purchase.
8 Returned half the inventory purchased on January 4 from Vanderbilt Company.
10 Sold merchandise inventory for cash, $1,600. Cost of goods, $640. FOB destination.
11 Sold merchandise inventory to Graceland Corporation, $10,800, on account, terms of 1/10, n/EOM. Cost of goods, $5,400. FOB shipping point.
12 Paid freight bill of $60 on January 10 sale.
13 Sold merchandise inventory to Cabbell Company, $9,500, on account, terms of n/45. Cost of goods, $5,225. FOB shipping point.
14 Paid the amount owed on account from January 4, less return and discount.
17 Received defective inventory as a sales return from the January 13 sale, $600. Cost of goods, $300.
18 Purchased inventory of $4,600 on account from Roberts Corporation. Payment terms were 3/10, n/30, FOB destination.
20 Received cash from Graceland Corporation, less discount.
26 Paid amount owed on account from January 18, less discount.
28 Received cash from Cabbell Company, less return.
29 Purchased inventory from Sandra Corporation for cash, $11,600, FOB shipping point. Freight in paid to shipping company, $240.
Triton Department Store uses a periodic inventory system. The adjusted trial balance of Triton Department Store at December 31, 2018, follows:
TRITON DEPARTMENT STORE
Adjusted Trial Balance
December 31, 2018
Account Title Debit Credit
Accounts Receivable 84,600
Merchandise Inventory (beginning) 37,800
Office Supplies 850
Accumulated Depreciation-Furniture $18,500
Accounts Payable 29,400
Salaries Payable 2,300
Unearned Revenue 14,900
Notes Payable, long-term 36,000
Common Stock 60,000
Retained Earnings 22,850
Sales Revenue 374,000
Purchase Returns and Allowances 109,000
Purchase Discounts 6,400
Selling Expense 41,700
Administrative Expense 26,600
Interest Expense 3,700
Total $673,350 $673,350
1. Prepare Triton Department Store’s multi-step income statement for the year ended December 31, 2018. Assume ending Merchandise Inventory is $36,300.
2. Journalize Triton Department Store’s closing entries.
Click Computers has the following transactions in July related to purchasing and sale of merchandise inventory.
July 1 Purchase of $20,500 worth of computers on account, terms of 2/10, n/30.
3 Return of $4,000 of the computers to the vendor.
9 Payment made on the account.
12 Sold computers on account for $8,000 to a customer, terms 3/15, n/30.
26 Received payment from customer on balance due.
Journalize the transactions for Click Computers assuming that the company uses the periodic inventory system.
The unadjusted trial balance for Tuttle Electronics Company follows:
TUTTLE ELECTRONICS COMPANY
Unadjusted Trial Balance
October 31, 2018
Account Title Debit Credit
Accounts Receivable 33,800
Merchandise Inventory 45,700
Office Supplies 5,700
Accumulated Depreciation-Equipment $37,200
Accounts Payable 15,600
Unearned Revenue 13,400
Notes Payable, long-term 53,000
Common Stock 48,000
Retained Earnings 6,700
Sales Revenue 300,300
Cost of Goods Sold 171,600
Salaries Expense (Selling) 26,000
Rent Expense (Selling) 15,400
Salaries Expense (Administrative) 4,800
Utilities Expense (Administrative) 10,500
Total $474,200 $474,200
1. Journalize the adjusting entries using the following data:
a. Interest revenue accrued, $550.
b. Salaries (Selling) accrued, $2,800.
c. Depreciation Expense—Equipment (Administrative), $1,295.
d. Interest expense accrued, $1,500.
e. A physical count of inventory was completed. The ending Merchandise Inventory should have a balance of $45,300.
f. Tuttle estimates that approximately $6,200 of merchandise sold will be returned with a cost of $2,480.
2. Prepare Tuttle Electronics’s adjusted trial balance as of October 31, 2018.
3. Prepare Tuttle Electronics’s multi-step income statement for year ended October 31, 2018.
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