Question

The following information applies to the questions displayed below.]


James Company began the month of October with inventory of $20,000. The following inventory transactions occurred during the month:

1. The company purchased merchandise on account for $29,500 on October 12. Terms of the purchase were 2/10, n/30. James uses the net method to record purchases. The merchandise was shipped f.o.b. shipping point and freight charges of $550 were paid in cash.
2. On October 31, James paid for the merchandise purchased on October 12.
3. During October merchandise costing $18,750 was sold on account for $29,000.
4. It was determined that inventory on hand at the end of October cost $30,710.

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.)

• The company purchased merchandise on account for $29,500 on October 12. Terms of the purchase were 2/10, n/30. James uses the net method to record purchases.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
October 12

• The merchandise was shipped f.o.b. shipping point and freight charges of $550 were paid in cash.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
October 12

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

Record the sale of merchandise on account.

Record the cost of goods sold.

Record any necessary adjusting entry when the inventory on hand at the end of October cost $30,710.

Answer 1

Date	General Journal	Debit	Credit
October 12	Inventory	28910		=29500*(1-2%)
	Accounts Payable		28910
October 12	Inventory	550
	Cash		550
October 31	Accounts Payable	28910
	Inventory / Interest expense	590
	Cash		29500
October 31	Accounts Receivable	29000
	Sales revenue		29000
October 31	Cost of goods sold	18750
	Inventory		18750
October 31	No journal entry required