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James Company began the month of October with inventory of $29,000. The following inventory transactions occurred during the month:

1. The company purchased merchandise on account for $43,000 on October 12. Terms of the purchase were 3/10, n/30. James uses the net method to record purchases. The merchandise was shipped f.o.b. shipping point and freight charges of $640 were paid in cash.
2. On October 31, James paid for the merchandise purchased on October 12.
3. During October merchandise costing $20,100 was sold on account for $30,800.
4. It was determined that inventory on hand at the end of October cost $51,250.

Required:
1. Assuming that the James Company uses a perpetual inventory system, prepare journal entries for the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

• 1

  The company purchased merchandise on account for $43,000 on October 12. Terms of the purchase were 3/10, n/30. James uses the net method to record purchases.

• 2

  The merchandise was shipped f.o.b. shipping point and freight charges of $640 were paid in cash.

• 3

  On October 31, James paid for the merchandise purchased on October 12.

• 4

  Record the sale of merchandise on account.

• 5

  Record the cost of goods sold.

• 6

  Record any necessary adjusting entry when the inventory on hand at the end of October cost $51,250.

Answer 1

Journal entry

Date	Account and explanation	Debit	Credit
1	Merchandise inventory (43000*97%)	41710
	Account payable		41710
	(to record purchase)
2	Merchandise inventory	640
	Cash		640
	(To record freight paid)
3	Account payable	41710
	Merchandise inventory	1290
	Cash		43000
	(To record amount paid)
4	Account receivable	30800
	Sales revenue		30800
	(to record sales)
5	Cost of goods sold	20100
	Merchandise inventory		20100
	(To record cost of goods sold)
6	No adjusting entry