Macson, Inc. sells kitchen cabinets. On December 31, 2021, Macksons inventory amounted to $1,200,000. During the first week of January 2022, the company made the following transactions:

Jan. 5 Purchased 120 cabinets from Cabinet, Inc. The total cost of this purchase was $305,000, terms 5/10, n/60.

Jan. 10 Sold 90 cabinets on account to Wood & More, Inc. The total sales price was $100,400, terms 5/10, n/30. The total cost of these 90 units to Mackson was $45,000 (net of the purchase discount).

Jan. 12 Mackson paid the amount due to Cabinet, Inc. in order to benefit from the discount.

March 2 Wood & More, Inc. returned 30 of the 90 cabinets it had purchased from Mackson on January 10.

March 3 Wood & More, Inc. pays the full amount due to Mackson. .

Mackson, Inc. has a full-time accountant and a computer-based accounting system. The business records sales at the gross sales price (does not apply discount) and purchases at net cost (discount included).

Instructions

1. Briefly describe the operating cycle of a merchandising company. (5 points)

2. Prepare journal entries to record these transactions, assuming Mackson uses a

   perpetual inventory system. (10 points)

3. Prepare journal entries to record the transactions, considering that Mackson

   uses a periodic inventory system. (10 points)

4. Which type of inventory system do you think Mackson most likely would use?

   Explain your reasoning. (5 points)