Question

Pharoah Company buys merchandise on account from Flounder Company. The selling price of the goods is $1,450, and the cost of the goods is $1,100. Both companies use perpetual inventory systems.

Answer 1

Here is the complete question: Pharoah Company buys merchandise on account from Flounder Company. The selling price of the goods is $1,450, and the cost of the goods is $1,100. Both companies use perpetual inventory systems. Journalize the transaction in the books of both companies.

Given: Selling price of goods is $1450

Cost of goods sold is $1100

Perpetual inventory system is a method of accounting for immediate recording inventory transaction through the use of technology. It is considered as more efficient method of Inventory management system.

Record of transaction in the books of Pharoah company:

Inventory accounts Dr ---------- $1450

Account payable Cr---------$1450

Record of transaction in the books of Flounder company:

Account receiveable Dr ---------- $1450

Sales revenue Cr---------$1450

Cost of goods sold Dr ------------- $1100

Inventory Cr-----------$1100