Preparing journal entries for merchandising activities—perpetual system

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Problem 5-2A

Preparing journal entries for merchandising activities—perpetual system P1 P2

Prepare journal entries to record the following merchandising transactions of Lowe’s, which uses the perpetual inventory system and the gross method. Hint: It will help to identify each receivable and payable; for example, record the purchase on August 1 in Accounts Payable—Aron.

CheckAug. 9, Dr. Delivery Expense, $125

Aug. 18, Cr. Cash, $4,950

Aug. 29, Dr. Cash, $4,300

Problem 6-3A

Perpetual: Alternative cost flows P1

Montoure Company uses a perpetual inventory system. It entered into the following calendar-year purchases and sales transactions. (For specific identification, units sold consist of 600 units from beginning inventory, 300 from the February 10 purchase, 200 from the March 13 purchase, 50 from the August 21 purchase, and 250 from the September 5 purchase.)


  1. Compute cost of goods available for sale and the number of units available for sale.
  2. Compute the number of units in ending inventory.
  3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. (Round all amounts to cents.)

Check (3) Ending inventory: FIFO, $18,400; LIFO, $18,000; WA, $17,760

  1. Compute gross profit earned by the company for each of the four costing methods in part 3.

(4) LIFO gross profit, $45,800

Analysis Component

  1. The company’s manager earns a bonus based on a percent of gross profit. Which method of inventory costing produces the highest bonus for the manager?

Problem 9-3A

Aging accounts receivable and accounting for bad debts P2 P3

On December 31, Jarden Co.’s Allowance for Doubtful Accounts has an unadjusted credit balance of $14,500. Jarden prepares a schedule of its December 31 accounts receivable by age.


  1. Compute the required balance of the Allowance for Doubtful Accounts at December 31 using an aging of accounts receivable.
  2. Prepare the adjusting entry to record bad debts expense at December 31.

Check (2) Dr. Bad Debts Expense, $27,150

Analysis Component

  1. On June 30 of the next year, Jarden concludes that a customer’s $4,750 receivable is uncollectible and the account is written off. Does this write-off directly affect Jarden’s net income?

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