Hi, can you help me do the perpetual journal entry and calculate check what is the problem with my old and new COGS calculations for this inventory? No need to do the calculations for the ratios. I will appreciate your help. Thank you in advance!

This lesson is about Inventory. I just need to figure out how to do the Journal entry and correct the COGS calculation from old to new COGS

Cost of Goods Sold Price Perpetual LIFO Purchases # of Units Prices 5400 16000 $ # of Units Cost Date Beginning Balance Jan. 15 Feb.28 #of Units Cost $ 9 $ 43,200 144,000 Inventory Balance Price 5400 $ 16000 $ 5400 $ 14000 $ 9 $ 126,000 9000 $ 2000 s Mar. 14 Mar. 20 (2%Disc. From Mar. 14) Mar. 30 11 $ $ 99,000 (1,980) 9000 $ 1100 $ 900 $ 2700 $ 10.78 $ 9 $ 9 $ 8 $ Cost 8 $ 9 $ 8 S $ 9 $ $ $ 8 $ 9 $ 9 $ 8 1$ $ $ s 8 97,020 9,900 8,100 21,600 43,200 144,000 187,200 61,200 160,200 158,220 61,200 51,300 43,200 21,600 231,600 133,600 49,600 Jul. 30 5400 $ 900 $ 0 $ 2700 $ 15000 $ 14 $ 210,000 Aug. 20 Sept. 2 Dec. 1 7000 $ 6000 $ 14 $ 14 $ 98,000 84,000 2700 $ 2000 $ 14 45400 $ 494,220 40700 $ 444,620 4700 $ 49,600 Information: Terry's management is afraid that an error was made when calculating COGS. Most of the calculations have already been checked by the auditors, but management still thinks that one inventory item has not been correctly recorded. They would like you to go back through the inventory calculations for that item to correct any possible mistakes. Currently they show that 5,400 units of item TC178, purchased for $8 each, were on hand at the beginning of the year, that $476,000 worth of TC178 was purchased during the year, that discounts of $2,400 were earned by making early payments on these purchases, and that $3,800 worth of returns were made during the year. The records show that only 4,900 units of the beginning TC178 inventory remained at the end of the year. Terry uses the perpetual LIFO system for calculating inventory. Their inventory transactions for item TC178 for the period are as follows: (NOTE that the vendor provides free shipping on all units of TC178) At the beginning of the period, 5,400 units of TC178, purchased for $8.00 each, were on hand. . On Jan 15, an additional 16,000 units were purchased for $9.00 each. On February 28, 14,000 units were sold. On March 14, an additional 9,000 units were purchased for $11.00 each. On March 20, a 2.0% cash discount was earned by paying for the March 14 purchase early. . On March 30, 10,100 units were sold. . On July 30, 3,600 units were sold. . On August 20, an additional 15,000 units were purchased for $14.00 each. . On September 2, 7,000 units were sold. . On December 1, 6,000 units were sold. Terry's management would like to know the effect of the sale on the following ratios: Inventory Turnover (COGS / average total inventory) . Current Ratio ROA Hints: 1. Start out by calculating Terry's COGS on TC178 given the original information. The best way to do this is to set up a formal COGS calculation like the one we did in the Income Statement in Terry #2. The formal calculation for one product would look just like the COGS section of the income statement, but it would only include the values for the one product. 2. Use the perpetual inventory method to find out what purchases, purchase discounts, and COGS should be for TC178 using a formal perpetual inventory table. Once you have those numbers, set up another formal COGS calculation like the one you made for the original information using the new information. 3. Compare the new COGS calculation to the old one. The differences between the two sets of calculations are the changes that you need to record in your journal entry. 4. When making your journal entry, keep in mind that Terry has a perpetual inventory system. This means the company doesn't have a purchase returns or a purchase discount" account. Instead, everything will be done using the inventory account. Your final entry, then, should change only three accounts: COGS, Inventory, and A/P. You can get the changes to COGS and Inventory from the differences in your COGS equations (old vs. new). You will use A/P as the plug figure. Why? Well, to explain that, we have to go back to what the original journal entries look like for a company that uses the perpetual inventory system. When we buy inventory in a perpetual system, we debit inventory and credit A/P. When we pay for inventory, we debit A/P and credit cash. If we get a discount or make a return, we debit A/P and credit Inventory. That means that any mistake in recording purchases, returns, or discounts would cause a mistake in both the Inventory account AND the A/P account. Then when we sell inventory, we would debit COGS and credit Inventory, so mistake in recording sales would case a mistake in both Inventory AND COGS. So, in order to correct for all of Terry's mistakes, we need to adjust all three of those accounts: Inventory, COGS, and A/P. Cost of Goods Sold Price Perpetual LIFO Purchases # of Units Prices 5400 16000 $ # of Units Cost Date Beginning Balance Jan. 15 Feb.28 #of Units Cost $ 9 $ 43,200 144,000 Inventory Balance Price 5400 $ 16000 $ 5400 $ 14000 $ 9 $ 126,000 9000 $ 2000 s Mar. 14 Mar. 20 (2%Disc. From Mar. 14) Mar. 30 11 $ $ 99,000 (1,980) 9000 $ 1100 $ 900 $ 2700 $ 10.78 $ 9 $ 9 $ 8 $ Cost 8 $ 9 $ 8 S $ 9 $ $ $ 8 $ 9 $ 9 $ 8 1$ $ $ s 8 97,020 9,900 8,100 21,600 43,200 144,000 187,200 61,200 160,200 158,220 61,200 51,300 43,200 21,600 231,600 133,600 49,600 Jul. 30 5400 $ 900 $ 0 $ 2700 $ 15000 $ 14 $ 210,000 Aug. 20 Sept. 2 Dec. 1 7000 $ 6000 $ 14 $ 14 $ 98,000 84,000 2700 $ 2000 $ 14 45400 $ 494,220 40700 $ 444,620 4700 $ 49,600 Information: Terry's management is afraid that an error was made when calculating COGS. Most of the calculations have already been checked by the auditors, but management still thinks that one inventory item has not been correctly recorded. They would like you to go back through the inventory calculations for that item to correct any possible mistakes. Currently they show that 5,400 units of item TC178, purchased for $8 each, were on hand at the beginning of the year, that $476,000 worth of TC178 was purchased during the year, that discounts of $2,400 were earned by making early payments on these purchases, and that $3,800 worth of returns were made during the year. The records show that only 4,900 units of the beginning TC178 inventory remained at the end of the year. Terry uses the perpetual LIFO system for calculating inventory. Their inventory transactions for item TC178 for the period are as follows: (NOTE that the vendor provides free shipping on all units of TC178) At the beginning of the period, 5,400 units of TC178, purchased for $8.00 each, were on hand. . On Jan 15, an additional 16,000 units were purchased for $9.00 each. On February 28, 14,000 units were sold. On March 14, an additional 9,000 units were purchased for $11.00 each. On March 20, a 2.0% cash discount was earned by paying for the March 14 purchase early. . On March 30, 10,100 units were sold. . On July 30, 3,600 units were sold. . On August 20, an additional 15,000 units were purchased for $14.00 each. . On September 2, 7,000 units were sold. . On December 1, 6,000 units were sold. Terry's management would like to know the effect of the sale on the following ratios: Inventory Turnover (COGS / average total inventory) . Current Ratio ROA Hints: 1. Start out by calculating Terry's COGS on TC178 given the original information. The best way to do this is to set up a formal COGS calculation like the one we did in the Income Statement in Terry #2. The formal calculation for one product would look just like the COGS section of the income statement, but it would only include the values for the one product. 2. Use the perpetual inventory method to find out what purchases, purchase discounts, and COGS should be for TC178 using a formal perpetual inventory table. Once you have those numbers, set up another formal COGS calculation like the one you made for the original information using the new information. 3. Compare the new COGS calculation to the old one. The differences between the two sets of calculations are the changes that you need to record in your journal entry. 4. When making your journal entry, keep in mind that Terry has a perpetual inventory system. This means the company doesn't have a purchase returns or a purchase discount" account. Instead, everything will be done using the inventory account. Your final entry, then, should change only three accounts: COGS, Inventory, and A/P. You can get the changes to COGS and Inventory from the differences in your COGS equations (old vs. new). You will use A/P as the plug figure. Why? Well, to explain that, we have to go back to what the original journal entries look like for a company that uses the perpetual inventory system. When we buy inventory in a perpetual system, we debit inventory and credit A/P. When we pay for inventory, we debit A/P and credit cash. If we get a discount or make a return, we debit A/P and credit Inventory. That means that any mistake in recording purchases, returns, or discounts would cause a mistake in both the Inventory account AND the A/P account. Then when we sell inventory, we would debit COGS and credit Inventory, so mistake in recording sales would case a mistake in both Inventory AND COGS. So, in order to correct for all of Terry's mistakes, we need to adjust all three of those accounts: Inventory, COGS, and A/P