Business: Exercise 8-1 (algo) perpetual inventory system; journal entries [lo8-1] john’s specialty store uses a perpetual inventory system. the following are some inventory transactions for the month of may: john’s purchased merchandise on account for $5,300. freight charges of $450 were paid in cash. john’s returned some of the merchandise purchased in (1). the cost of the merchandise was $750 and john’s account was credited by the supplier. merchandise costing $2,950 was sold for $5,500 in cash. required:

Exercise 8-1 (algo) perpetual inventory system;

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09.01.2022

Explanation:

The journal entries are shown below:

1. Merchandise Inventory A/c $5,300

To Accounts payable A/c $5,300

(Being inventory purchased on credit)

2. Merchandise inventory A/c Dr $450

To Cash A/c $450

(Being freight is paid by cash)

3. Account payable A/c Dr $750

To Merchandise inventory A/c $750

(Being returned inventory is recorded)

4. Cash A/c Dr $5,500

To Sales revenue A/c $5,500

(Being cash is collected)

5. Cost of goods sold A/c Dr $2,950

To Merchandise inventory A/c $2,950

(Being inventory sold at cost)

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