Question

Sage Hill, Inc. uses a perpetual inventory system. Its beginning inventory consists of 130 units that cost $210 each. During August, the company purchased 215 units at $210 each, returned 6 units for credit, and sold 245 units at $480 each.

Required:
1. Journalize the August transactions.

Answer 1

Sage Hill, Inc.

Perpetual Inventory System

1) Merchandise Inventory $45150 Dr.

Accounts Payable/ Cash $ 45150 Cr

Purchased 215 units at $210 each $ 210*215 = $45150

2) Accounts Payable $ 1260 Dr

Merchandise Inventory $1260 Cr

Returned 6 units for credit (6*210= 1260)

3) Accounts Receivable (Cash) $ 117600 Dr

Sales $ 117600 Cr

Sold 245 units at $480 each ( 245*$480= 117600)

Cost Of Goods Sold $51450Dr

Merchandise Inventory $51450Cr

( 245* 210= $51450) The cost of goods sold is recorded at the time of sales under perpetual inventory system.

4) Closing Entry

Sales $ 117600 Dr

Income Summary $ 117600 Cr.