Merchandise Transactions under Perpetual Inventory System
What are the merchandise transactions that occurred under perpetual inventory system? How do we record these transactions?
Recording Merchandise Transactions
Jul 1: Business purchased $5,100 inventory from MCS Inc. on credit (Term 2/10, n/30 FOB)
Entry: Inventory (asset) $5,100, Accounts Payable $5,100
Jul 2:
Entry: Business purchased $2,200 inventory from DCP Inc. and paid in cash.
Entry: Inventory (asset) $2,200, Cash $2,200
Jul 3:
Entry: Business paid $235 shipping charges for the inventory purchased on Jul 1.
Entry: Shipping Expense (expense) $235, Cash $235
Jul 8:
Entry: Business purchased $6,300 inventory from Time's Inc. on credit (Term 2/10, n/30 FOB)
Entry: Inventory (asset) $6,300, Accounts Payable $6,300
Jul 12:
Entry: Business found $125 defective units from the Jul 8 purchase and returned them to Time's Inc.
Entry: Accounts Payable $125, Inventory (asset) $125
Jun 15:
Entry: Business paid MCS Inc in full.
Entry: Accounts Payable $5,100, Cash $5,100
Jul 30:
Entry: Business paid Time's Inc in full.
Entry: Accounts Payable $6,300, Cash $6,300
Instead of paying Time's Inc on Jul 30:
Entry: If the business was paying Time's Inc on Jul 18.
Entry: Accounts Payable $6,300, Cash $6,300
The entries record the merchandise transactions and payments related to inventory purchases and returns. The terms (2/10, n/30) indicate a discount of 2% if paid within 10 days and a net payment period of 30 days.