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This information relates to Sherper Co. 1. On April 5, purchased merchandise from Newport Company...

Question:

This information relates to Sherper Co.

1. On April 5, purchased merchandise from Newport Company for $22,000, terms 2/10, n/30.

2. On April 6 paid freight costs of $900 on merchandise purchased from Newport.

3. On April 7 purchased equipment on account for $26,000.

4. On April 8 returned some of April 5 merchandise to Newport Company which cost $2,000.

5. On April 15 paid the amount due to Newport company in full.

Instructions

(a) Prepare the journal entries to record the transactions listed above on the books of Sherper Co. Sherper Co. uses a perpetual inventory system.

(b) Assume that Sherper Co. paid the balance due to Newport Company on May 4 instead of April 15. Prepare the journal entry to record this payment.

Perpetual Inventory System:

The perpetual inventory system is a system to compute the balance of the inventory. Here, it updates the inventory account once the transaction happens.

Answer and Explanation: 1

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(a)

April 5 The purchase of merchandise on account increases the inventory account and the accounts payable account by $22,000.

Account TitleDebitC...

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Perpetual Inventory System: Definition, Advantages & Examples

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Chapter 1 / Lesson 15
50K

Perpetual inventory systems are used by businesses to monitor their inventories in real-time with the use of radio frequency identification, barcodes, point of sales, and other technological systems. Learn about the definition of a perpetual inventory system, the advantages of using this system, and some examples of perpetual inventory systems.


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