Question

Apparel purchased 90 new shirts and recorded a total cost of $2,644 determined as follows: Invoice cost $ 2,160 Shipping charges 194 Import taxes and duties 160 Interest (6.0%) on $2,160 borrowed from the bank to finance the purchase 130 $ 2,644 Required: Prepare the journal entry to record this purchase in the correct amount, assuming a perpetual inventory system.

Answer 1

The journal entry to record the purchase of shirts includes debiting Inventory for the total cost ($2,644) and crediting Cash or Bank Loan ($2,160) and Accounts Payable ($484) for the associated costs.

Step-by-step explanation:

To record the purchase of the new shirts under a perpetual inventory system, we need to create a journal entry that includes all costs associated with the purchase (invoice cost, shipping charges, import taxes and duties, and interest). The journal entry would be as follows:

1. Debit Inventory for the total cost of the shirts including additional costs: $2,644 (This represents the entire cost of the shirts including invoice cost, shipping, import taxes, and interest).
2. Credit Cash or Bank Loan for the amount funded by the bank: $2,160 (This represents the principal amount borrowed from the bank).
3. Credit Accounts Payable for the shipping charges, import taxes, and interest: $484 ($194 + $160 + $130 = $484) (These are the additional costs not covered by the loan).

The complete journal entry reflects the inventory's cost and the associated liabilities. The Inventory account increases because the shirts are now an asset that can be sold. Cash or Bank Loan decreases since cash is paid or a liability is incurred to the bank. Accounts Payable increases due to the additional payables incurred.

Journal Entry:

• Inventory ............... $2,644
• Cash/Bank Loan ............... $2,160
• Accounts Payable ............... $484

Answer 2

Merchandise inventory 2,514 debit

Accounts payable 2,160 credit

Cash 194 credit

Import tariff 160 credit

--to record the acquisition of imported inventory--

interest expense 130 debit

interest payable 130 credit

--to record accrued interest--

Step-by-step explanation:

The inventory will enter the accounting as the sum of all necessary cost to acquired an leave it ready for use or sale. In this case,the freigth and tariff are necessary but, the interest don't Therefore, they will be declared costo fo the period