Danny Company has inventory of $14,000 at 30 November 2022 and is engaged in the following transactions during December 2022.

2 Purchased 1,000 boxes of candles for resale for $120 per box from Boeing Company on account. 5 Returned 10 boxes of defective candles to Boeing Company. 8 Sold 200 boxes of candles to a customer for cash at a gross profit rate of 20%. 22 Paid half of the amount owed to Boeing Company for the candles purchased on 2 December. 26 The customer returned 10 boxes of candles purchased on 8 December to Danny Company for a cash refund because they are in the wrong color.

Part II (18 marks) - Assuming perpetual inventory system is used Required: (a) Prepare the journal entries for the above transactions in December 2022. (14 marks) (b) Prepare the adjusting entry if a physical inventory taken as at 31 December 2022 indicates goods costing $107,000 remains in stock.