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Answer Task 1 and 2 Make Task 2 by Table Format

The document outlines the accounting processes for Hareg Stationary using two inventory systems: Periodic and Perpetual. It details journal entries for transactions, adjusting entries for cost of goods sold, and closing entries for both systems. The document includes calculations for inventory and cost of goods sold, highlighting differences between physical counts and book balances.

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2 views3 pages

Answer Task 1 and 2 Make Task 2 by Table Format

The document outlines the accounting processes for Hareg Stationary using two inventory systems: Periodic and Perpetual. It details journal entries for transactions, adjusting entries for cost of goods sold, and closing entries for both systems. The document includes calculations for inventory and cost of goods sold, highlighting differences between physical counts and book balances.

Uploaded by

eyobyohanes903
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Absolutely! Let's break down this accounting problem step-by-step.

Understanding the Problem


Hareg Stationary is using two different inventory systems:
●​ Periodic Inventory System (Task 1): Inventory is updated only at the end of the
accounting period through a physical count.
●​ Perpetual Inventory System (Task 2): Inventory is updated continuously with each
purchase and sale.
Task 1: Periodic Inventory System
1. General Journal Entries for Transactions
●​ June 1, 2022 (Beginning Inventory): No journal entry is required for beginning inventory
under the periodic system.
●​ February 2, 2022 (Purchase on Credit):​
Purchases 1600 (160 units x Br. 10)​
Accounts Payable 1600​

●​ February 7, 2022 (Return of Defective Units):​


Accounts Payable 300 (30 units x Br. 10)​
Purchase Returns and Allowances 300​

●​ June 15, 2022 (Purchase for Cash):​


Purchases 2160 (240 units x Br. 9)​
Cash 2160​

●​ September 6, 2022 (Sales):​


Cash 3600 (240 units x Br. 15)​
Sales Revenue 3600​

2. Adjusting Entry (December 31, 2022)


●​ Calculate Cost of Goods Sold (COGS):
○​ Beginning Inventory: 130 units x Br. 9 = Br. 1170
○​ Purchases: (160 units x Br. 10) + (240 units x Br. 9) = Br. 1600 + Br. 2160 = Br.
3760
○​ Purchase Returns: 30 units x Br. 10 = Br. 300
○​ Goods Available for Sale: Br. 1170 + Br. 3760 - Br. 300 = Br. 4630
○​ Ending Inventory: 290 units (given)
○​ Cost of Ending Inventory:
■​ 40 units (from Feb 2 purchase) x Br. 10 = Br. 400
■​ 250 units (from June 15 purchase) x Br. 9 = Br. 2250
■​ Total Ending Inventory: Br. 400 + Br. 2250 = Br. 2650
○​ COGS: Br. 4630 - Br. 2650 = Br. 1980
●​ Adjusting Entry:​
Cost of Goods Sold 1980​
Merchandise Inventory 1980 ​

3. Closing Entries (December 31, 2022)


●​ Close Sales Revenue:​
Sales Revenue 3600​
Income Summary 3600​
●​ Close Expenses (COGS):​
Income Summary 1980​
Cost of Goods Sold 1980​

●​ Close Income Summary to Retained Earnings:​


Income Summary 1620 (Br. 3600 - Br. 1980)​
Retained Earnings 1620​

Task 2: Perpetual Inventory System


1. General Journal Entries for Transactions
●​ June 1, 2022 (Beginning Inventory):​
Merchandise Inventory 1170 (130 units x Br. 9)​
Retained Earnings 1170​

●​ February 2, 2022 (Purchase on Credit):​


Merchandise Inventory 1600 (160 units x Br. 10)​
Accounts Payable 1600​

●​ February 7, 2022 (Return of Defective Units):​


Accounts Payable 300 (30 units x Br. 10)​
Merchandise Inventory 300​

●​ June 15, 2022 (Purchase for Cash):​


Merchandise Inventory 2160 (240 units x Br. 9)​
Cash 2160​

●​ September 6, 2022 (Sales):​


Cash 3600 (240 units x Br. 15)​
Sales Revenue 3600​

○​ Record Cost of Goods Sold:


■​ 120 units (from beginning inventory) x Br. 9 = Br. 1080
■​ 120 units (from February purchase) x Br. 10 = Br. 1200
■​ Total COGS: Br. 1080 + Br. 1200 = Br. 2280
Cost of Goods Sold 2280​
Merchandise Inventory 2280​

2. Adjusting Entry (December 31, 2022)


●​ Calculate Ending Inventory:
○​ 40 units (from February purchase) x Br. 10 = Br. 400
○​ 250 units (from June 15 purchase) x Br. 9 = Br. 2250
○​ Total Ending Inventory: Br. 400 + Br. 2250 = Br. 2650
●​ Compare to Book Balance:
○​ Beginning Inventory: Br. 1170
○​ Purchases: Br. 1600 + Br. 2160 = Br. 3760
○​ Purchase Returns: Br. 300
○​ COGS: Br. 2280
○​ Book Balance: Br. 1170 + Br. 3760 - Br. 300 - Br. 2280 = Br. 2350
○​ Difference: Br. 2650 (physical count) - Br. 2350 (book balance) = Br. 300
●​ Adjusting Entry (if needed):
○​ Since the physical count is higher, we need to increase inventory:
Merchandise Inventory 300​
Cost of Goods Sold 300​

3. Closing Entries (December 31, 2022)


●​ Close Sales Revenue:​
Sales Revenue 3600​
Income Summary 3600​

●​ Close Expenses (COGS):​


Income Summary 1980 (Br. 2280 - Br. 300)​
Cost of Goods Sold 1980​

●​ Close Income Summary to Retained Earnings:​


Income Summary 1620 (Br. 3600 - Br. 1980)​
Retained Earnings 1620​

Task 2: Perpetual Inventory System (Table Format)


Date Transaction Merchandise Inventory Cost of Goods Sold
June 1, 2022 Beginning Inventory +Br. 1170
Feb 2, 2022 Purchase on Credit +Br. 1600
Feb 7, 2022 Return of Defective -Br. 300
Units
June 15, 2022 Purchase for Cash +Br. 2160
Sept 6, 2022 Sales (Record COGS) -Br. 2280 +Br. 2280
Dec 31, 2022 Adjustment (Physical +Br. 300 -Br. 300
Count vs. Book
Balance)
Note: The table shows the changes to the Merchandise Inventory and Cost of Goods Sold
accounts. You would still need to make the journal entries as shown above.
Let me know if you have any more questions!

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