Part I

(1) Describe the key differences between a perpetual inventory system and a periodic inventory system.

(2) From the perspective of the seller, how are sales journal entries different under each system?

(3) Journalize the following transactions using the perpetual system and then the periodic system. Please show your work for any calculations.

(a) July 5 Purchased merchandise on account from Lester Co., $32,400, (buyer will pay the freight), terms 2/10, n/30.

(b) July 15 Paid Lester Co. for purchase of July 5.

Part II

(1) What kinds of businesses do you think would use each type of inventory system?

(2) Which system would you prefer to use and why?