Example 2 (Company B)

On June 5, 2010: Purchased 600 units of merchandise at $35 per unit. Under Perpetual inventory system 6/5/2010 Merchandise Inventory Accounts payable Under Periodic inventory system 6/5/2010 Purchases Accounts payable Debit 21,000 21,000 Credit Debit 21,000 21,000 Credit

Under periodic inventory system, all purchases during the accounting period are recorded in the "Purchases" account. On June 16, 2010: Sold 400 units of merchandise at $55 per unit on credit. Under Perpetual inventory system 6/16/2010 Accounts Receivable Sales 6/16/2010 Cost of goods sold Merchandise inventory Debit 14,000 14,000 Debit 22,000 22,000 Credit Credit

Under perpetual inventory system, changes in merchandise inventory account are recorded after each transaction. Under Periodic inventory system 6/16/2010 Accounts Receivable Sales Debit 22,000 22,000 Credit

Under periodic inventory system, the following journal entry is recorded at the end of accounting period. 6/30/2010 Merchandise Inventory Purchases Quantity of merchandise inventory = 600 units purchased - 400 units sold = 200 units left Cost of merchandise inventory = 200 units x $35 per unit cost = $7,000 6/30/2010 Cost of goods sold Purchases Debit 14,000 14,000 Credit Debit 7,000 7,000 Credit

Cost of goods sold = Total purchases - Ending balance of merchandise inventory = 600 units x $35 per unit cost - 200 units x$35 per unit cost = $21,000 - $7,000 = $14,000

On May 1, 2010: Purchased 1,000 units of merchandise at $30 per unit. Under Perpetual inventory system 5/1/2010 Merchandise Inventory Accounts payable Under Periodic inventory system 5/1/2010 Purchases Accounts payable Debit 30,000 30,000 Credit Debit 30,000 30,000 Credit

Under periodic inventory system, all purchases during the accounting period are recorded in the "Purchases" account. On May 6, 2010: Sold 200 units of merchandise at $50 per unit on credit. Under Perpetual inventory system 5/1/2010 Accounts Receivable Sales 5/1/2010 Cost of goods sold Merchandise inventory Debit 6,000 6,000 Debit 10,000 10,000 Credit Credit

Under perpetual inventory system, changes in merchandise inventory account are recorded after each transaction. Under Periodic inventory system 5/1/2010 Accounts Receivable Sales Debit 10,000 10,000 Credit

Under periodic inventory system, the following journal entry is recorded at the end of accounting period.

5/31/2010 Merchandise Inventory Purchases

Debit 24,000

Credit

24,000

Quantity of merchandise inventory = 1,000 units purchased - 200 units sold = 800 units left Cost of merchandise inventory = 800 units x $30 per unit cost = $24,000 5/31/2010 Cost of goods sold Purchases Debit 6,000 6,000 Credit

Cost of goods sold = Total purchases - Ending balance of merchandise inventory = 1,000 units x $30 per unit cost - 800 units x$30 per unit cost = $30,000 - $24,000 = $6,000

Ending inventory = Beginning inventory + Purchases during the period - Cost of goods sold = $0 + $30,000 - $6,000 = $24,000 Cost of goods sold = Beginning inventory + Purchases during the period - Ending inventory = $0 + $30,000 - $24,000 = $6,000