Big Swing Sales is a rapidly growing speciality advertising company that distributes golf balls with personalized corporate logos printed on them. Heretofore, the company has used a manual perodic inventory system. However, the company is evaluating installation of an automated inventory tracking system that can be integrated with a perpetual inventory module in the company's accounting software package that is presently under development. The company's information technology staff is working on the basic software development for this task, and is needing some help understanding the mechanics of periodic vs. perpetual inventory accounting techniques. (a) Develop journal entries for each of the following representative transaction, to show how they would be handled with a periodic (gross and net) vs. perpetual system (gross and net). #1 Purchased $55,000 of balls on account, F.O.B. destination, terms 2/10, n/30. #2 Paid the amount due for the preceding purchase within the discount period. #3 Sold golf balls for $80,000 on account, F.O.B. shipping point, freight-collect, terms 1/10, n/30. The balls had a net cost of $39,300. (b) Using the representative transactions, show how cost of goods sold is measured under the alternative systems. Assume Big Swing had a beginning inventory of $21,000.

GENERAL JOURNAL Page Date Accounts Debit Credit T#1 Periodic -- recording of purchase (assuming gross method) vs. Periodic -- recording of purchase (assuming net method) vs. Perpetual -- recording of purchase (assuming gross method) vs. Perpetual -- recording of purchase (assuming net method) GENERAL JOURNAL Page Date Accounts Debit Credit T#2 Periodic -- recording of payment (assuming gross method) vs. Periodic -- recording of payment (assuming net method) vs. Perpetual -- recording of payment (assuming gross method) vs. Perpetual -- recording of payment (assuming net method) GENERAL JOURNAL Page Date Accounts Debit Credit T#3 Periodic -- recording of sale (assuming gross method) vs. Periodic -- recording of sale (assuming net method) vs. and Perpetual -- recording of sale (assuming gross method) vs. and Perpetual -- recording of sale (assuming net method) With the perpetual system, the general ledger tracks the cost of goods sold on an ongoing basis. The account contains _____________. Further, the Inventory account contains __________ . With the gross periodic system, the calculation of cost of goods sold would be as follows: Beginning inventory Plus: Net purchases Cost of goods available for sale Less: Ending inventory * Cost of goods sold With the net periodic system, the calculation of cost of goods sold would be as follows:. Beginning inventory Plus: Purchases Cost of goods available for sale Less: Ending inventory * Cost of goods sold * Ending inventory would be determined by a physical count (this presentation assumes it would "match" amounts found in the perpetual system ledger).