PROBLEM : 5.

A) Compute cost of goods sold:

Last year inventory/starting 5,200
Purchases 62,000
Cost of goods available for sale 67,200
Less; ending inventory 3,800
Cost of goods sold 63,400

B)
All businesses at a lower and smaller scale follows periodic
inventory system because it helps them to prevent from so
many entries and small businesses usually checks there
standing at the end of accounting period . they usually don’t
need financial statement at the mid of accounting period for
decision making. Perpetual inventory system tracks down the
complete and descriptive detail of whole corporation, and it is
not required in small businesses. Usually in small business they
can calculate and analyses their inventory by physical means.
So small businesses should carry on with periodic inventory
system.

C)
A larger business may have millions of product at its single
warehouse and if there are many warehouses then it would be
impossible for large business management to track down the
record of inventory present at ware house, its cost and other
details. Periodic inventory system doesn’t track down the costs
of goods sold and some other information. Therefore it would
be disadvantageous for large businesses to carry on its
accounting process through periodic inventory system.

PROBLEM:# 5.5
 A) Journal entries using perpetual inventory system for
EXPLORER SCOPES

DATE ACCOUNT DEBITED CREDITED

Jan-2 1)Cash 62,000
Sales revenue 62,000
2) Cost of goods sold 37,200
Inventory 37,200
Jan -5 Inventory 80,000
Account payable 80,000

B) Subsidiary ledger of inventory account to find out

balance of inventory account:
Subsidiary ledger for inventory
PURCHASED SOLD BALANCE
DATE UNIT Uni total unit Uni Total Unit Uni Total
S t s t s t
cos cos cos
t t t
DEC3 120,0
1 00
JAN2 37,20 82,80
0 0
JAN5 80,00 162,8
0 00

C) Journal entries using periodic inventory system:

DATE ACCOUNT DEBITED CREDITED

JAN-2 Cash 62,000
Sales revenue 62,000
JAN-5 Purchase 80,000
Account payable 80,000
 D)
COST OF GOODS SOLD USING PERIODIC INVENTORY SYSTEM
On Dec31; inventory at 120,000
beginning
Add:purchase 80,000
Cost of goods available for 200,000
sale
Less: inventory ending 162,800
Cost of goods sold 37,200

E)Which inventory system to follow:

Explorer scopes should follow periodic inventory system. As
we have seen earlier that periodic inventory system caters
with all information needed for this entity, and gives the cost
of goods sold and other such information on hand so there is
no need for this firm to follow perpetual inventory system.

PROBLEM #5.6
A) Using perpetual inventory prepare journal entries:

DATE ACCOUNT DEBITED CREDITED

JUNE- INVENTORY 2500
10 ACCOUNTS PAYABLE 2500
JUNE- CASH 400
15 SALES REVENUE 400
Cost of goods sold 250
inventory 250
JUNE- ACCOUNT PAYABLE 2500
20 CASH 2450
INVENTORY 50
 B) USING PERPETUAL INVENTORY SYSTEM PREPARE JOURNAL
ENTRIES FOR FEDDERS TV
DATE ACCOUNT DEBITED CREDITED
JUNE- INVENTORY 2500
10 ACCOUNTS PAYABLE 2500
JUNE- CASH 400
15 SALES REVENUE 400
JULY- ACCOUNT PAYABLE 2500
10 CASH 2500