Accounting records for Red Deer Tire Ltd. yield the following data for the year ended December 31,
Question:
Accounting records for Red Deer Tire Ltd. yield the following data for the year ended December 31, 2017 (amounts in thousands):
Inventory, December 31, 2016............................................................................. $ 550
Purchases of inventory (on account).................................................................... 1,200
Sales of inventory-80% on account; 20% for cash (cost $900)......................... 2,000
Inventory at FIFO cost, December 31, 2017.......................................................... 850
Requirements
1. Journalize Red Deer Tire's inventory transactions for the year under (a) the perpetual system and (b) the periodic system. Show all amounts in thousands. Use Exhibit 5-4 as a model, on page 237.
2. What differences do you notice in the journal entries between the perpetual system and the periodic system?
3. Report ending inventory, sales, cost of goods sold, and gross profit on the appropriate financial statement (amounts in thousands), assuming the perpetual inventory system is used?
EXHIBIT 5-4
Recording and Reporting Inventory-Perpetual System and Periodic System (Amounts Assumed)
Step by Step Answer:
Financial Accounting
ISBN: 978-0134564142
6th Canadian edition
Authors: Walter Jr. Harrison, Charles T. Horngren, C. William Thomas, Greg Berberich, Catherine Seguin