Listed below are selected examples of transactions related to the purchase and sale of inventory from the perspective of the seller or the buyer as indicated. Assume a perpetual inventory system is in use. 1. 2. 3. 4. 5. 6. Buyer: Purchase of $3,920 of inventory for cash. Buyer: Return of $840 of inventory to seller for credit on account. Buyer: Purchase of 54.480 of inventory on account, terms 2/10, 1/45. Buyer: Payment of $480 cash for freight on purchase of inventory (FOB shipping point) Buyer: Payment of amount owed for purchase of $3,920 of inventory, terms 2/10, 1/30, paid within discount period. Seller: Sale of inventory on account, terms n/30. Selling price $10,000 cost $4,000. Management expects a return rate of 7.69% Seller: Return of damaged Inventory from buyer for cash. Selling price $600; cost $256. All of the goods were discarded because they are not resaleable. Seller: Payment of $640 cash for freight on sale of inventory (FOB destination), Seller: Return of unwanted inventory from buyer for credit on account. Selling price $480; cost $176. Goods restored to Inventory for future resale Seller: Receipt of payment ($8.960) from customer on account, terms /30 7 8. 9. 10. For each of the above transactions, indicate (a) the basic type (asset, liability, revenue or expense) of each account to be debited and credited. (b) the specific name(s) of the account(s) to debit and credit (for example, Inventory); and (c) whether each accountis increased (+) or decreased (-)and by what amount. The first one has been done for you as an example. (Enter specific debited account items in alphabetical order. Enter negative amounts using either a negative sign preceding the number es, 45 or parentheses es (451) (b) (c) (a) Basic Type of Account Basic Type of Account Asset Item Specific Account Amount Specific 1. $3.920 Asset Inventory Accounts Payable 2 Liability 840 Asset Inventory $ $ 3. Inventory 4480 Liability V Accounts Paya 4 Inventory $ $ > 480 Asset Cash 5. Liability Accounts Payable $ 3920 Asset Asset Inve 6. Asset > Accounts Recelvable Revenue Sales Return ar Expense C Cost of Goods Sold $ 3920 Contra Sales Estimated Inve Liability Asset > Inventory 7. Expense Cost of Goods Sold 256 Asset Cash Liability > Refund Liability $ 344 Asset Cash 8. Expense Freight Out $ 256 Asset > Cash 9. Liability > Cash $ 640 Asset Accounts Rece Asset Inventory >> $ 480 Asset Cost of Goods 10 Asset Cash > $ 8960 Asset Accounts Rece (b) (c) (a) Basic Type of Account Asset Specific Account Amount Cash -$3,920 Asset Inventory $ $ Contra Sales Estimated Inventory Returns Asset Inventory
