Please I Need Help With Periodic Inventory System!!!?
I have not taken an accounting class in a very long time and not fully understanding what I am suppose to do with this information. Can someone please tell me if I am doing this correctly. Here’s the problem: Michael Co had the following transactions in May. Michael Co. uses a periodic inventory system.
1 Purchased on account merchandise costing $30,000.
1 Paid $800 of freight charges for the merchandise received above
6 Purchased land for $20,000
10 Sold merchandise for a cash price of $8,000
14 Borrowed $10,000 signing a 90 day, 6% note.
18 Sold merchandise on account for $7,000
19 Issued 1000 shares of $1 par value common stock for $18,000
23 Sold land that was purchased on May 6 for $23,000
27 Received a $2,000 90-day note from a customer for a past due account receivable
30 Paid salaries of $3,000
So far I have it listed this way
DR: Purchase 30,000
CR: A/P 30,000
DR: Freight-In 800
CR: A/P 800
DR: Land 20,000
CR: A/P 20,000
DR: A/R 8,000
CR: Cash 8000
DR: Notes Payable 10,000
CR: Cash 10,000
DR: A/R 7000
CR: Sales 7000
CR: Common Stock 18000
DR: A/P 18,000
DR: A/R 23000
CR: Sales 23000
This is all I have so far
1 Purchased on account merchandise costing $30,000.
Dr Purchases $30,000
Cr Accounts Payable $30,000
1 Paid $800 of freight charges for the merchandise received above
Dr Freigh-in or Purchases $800
Cr Cash $800
6 Purchased land for $20,000
Dr Land $20,000
Cr Cash or Mortgage loan $20,000
10 Sold merchandise for a cash price of $8,000
Dr Cash $8,000
Cr Sales $8,000
14 Borrowed $10,000 signing a 90 day, 6% note.
Dr Cash $10,000
Cr Notes payable $10,000
18 Sold merchandise on account for $7,000
Dr Accounts receivable $7,000
Cr Sales $7,000
19 Issued 1000 shares of $1 par value common stock for $18,000
Dr Cash $18,000
Cr Common stock $1,000
Cr Additional paid-up capital in excess of par $17,000
23 Sold land that was purchased on May 6 for $23,000
Dr Cash $23,000
Cr Land $20,000
Cr Gain on sale of land $3,000
27 Received a $2,000 90-day note from a customer for a past due account receivable
Dr Notes receivable $2,000
Cr Accounts receivable $2,000
30 Paid salaries of $3,000
Dr Salaries expense $3,000
Cr Cash $3,000
I think A/P for Common stock should be a Cr.I cannot think of any cases other than a Cr Adjustment where a A/P is a Dr.(Dr)
Common stock would show as its own Dr Account in the GJ
Land and other assets would also create a Capital (Cr) account in the GJ
Periodic Inventory means that you do not record Cogs (Cost of Goods sold) instead at the end of the business period you record and value your closing stocks to get a value of your inventory SOH.
All Inventory purchased is recorded as a Purchase not as Inventory
Perpetual inventory means that you record the cost of Goods sold ( which is the cost to get goods to the salable position IE on the shelf in your store).Which is an expense offset against an Inventory account which is a Current Asset.,
Usually the best way to resolve these accounts is to assign their chart of Account number and put the accounts in account order.. That way you get them in order and they make more sense.
Get your accounts in order then apply the accounting equation,(A = L+OE (R-E) it becomes a lot clearer .
Once you have it set up then do a Trial balance , that will show if you have it right or not.