journalize the transaction1.) On April 15, Paul Trading purchased from Vanessa Merchandising Goods amounting to P30,000 on terms 50% down,balance 2/10,n/30.The next day Paul Trading issued a P2000 debit memorandum to Vanessa Merchandising for the return of defective merchandising bought.On April 20, Paul Trading paid P10,000 as partial payment. Paul Trading settled in full the outstanding account with Vanessa Merchandising on April 25.
Answers
Answer:
Some organizations choose to report merchandising transactions using a periodic inventory system rather than a perpetual inventory system. This requires different account usage, transaction recognition, adjustments, and closing procedures. We will not explore the entries for adjustment or closing procedures but will look at some of the common situations that occur with merchandising companies and how these transactions are reported using the periodic inventory system.
Merchandise Purchases
The following example transactions and subsequent journal entries for merchandise purchases are recognized using a periodic inventory system.
Basic Analysis of Purchase Transaction Journal Entries
To better illustrate merchandising activities under the periodic system, let’s return to the example of California Business Solutions (CBS). CBS is a retailer providing electronic hardware packages to meet small business needs. Each electronics hardware package contains a desktop computer, tablet computer, landline telephone, and a 4-in-1 desktop printer with a printer, copier, scanner, and fax machine.
CBS purchases each electronic product from a manufacturer. The per-item purchase prices from the manufacturer are shown.
Products and prices per unit: Desktop Computer of $400; Tablet Computer of $60; Landline Telephone of $60; and 4-in-1 desktop printer of $100.
Cash and Credit Purchase Transaction Journal Entries
On April 1, CBS purchases 10 electronic hardware packages at a cost of $620 each. CBS has enough cash-on-hand to pay immediately with cash. The following entry occurs.