Rules of Journal

Purchases: Periodic Inventory System Perpetual Inventory System

Purchases of merchandise on cash Purchases Merchandise Inventory
Cash Cash
Purchase of merchandise on credit Purchases Merchandise Inventory
Accounts Payable Accounts Payable
Purchase returns and allowances. Accounts Payable Account Payable
Purchase Returns & Merchandise Inventory
Allowances

Freight cost on purchase. Freight-in Merchandise Inventory

Cash / Accounts Payable Cash / Accounts Payable
Payment on account without a Accounts Payable Accounts Payable
discount. Cash Cash
Payment on account with a Accounts Payable Accounts Payable
discount. Cash Cash
Purchase Discounts Merchandise Inventory
 Rules of Journal

Sales: Periodic Inventory System Perpetual Inventory System

Sale of merchandise, Cash. (i) By sales price: (i) By sales price:
Cash
Cash Sales Revenue
Sales Revenue (ii) By cost price:
Cost of Goods Sold
Merchandise Inventory.

Sale of merchandise on credit (i) By sales price: (i) By sales price:

Accounts Receivable
Accounts Receivable Sales
Sales (ii) By cost price:
Cost of Goods Sold
Merchandise Inventory.

Return of merchandise sold (i) By sales price: (i) By sales price:

Sales Returns & Allowances
Sales Returns & Allowances Accounts Receivable
Accounts Receivable (ii) By cost price:
Merchandise Inventory
Cost of Goods Sold

Freight cost on Sales Freight-out / Delivery Exp. Freight-out / Delivery Exp.

Cash/ Accounts payable
Cash / Accounts payable
Cash received on account without a Cash Cash
Accounts Receivable
Accounts Receivable
discount
Cash received on account with a Cash Cash
Sales Discount
Sales Discount Accounts Receivable
discount Accounts Receivable
Problem – 01 Periodic Inventory System

Prepare the journal entries to record the transactions; assuming the

Periodic inventory system is used
1-1-2016 Merchandise Purchase Tk. 40,000: Term 2/10, n/30.
2-1-2016 Freight charges on Merchandise Purchase Tk. 500.
3-1-2016 Merchandise sales Tk. 20,000. Term 2/10, n/30.
4-1-2016 Transportation out on F.O.B. destination Tk. 600.
5-1-2016 Purchase return of Tk. 4,000.
6-1-2016 Sales Return of Tk. 3,000.
7-1-2016 If Payment was made within discount period.
8-1-2016 If collection was received within the discount period.
 ......Company
Solution – 01 Journal Entry (Under Periodic Inventory System)
For the month of January, 2016.

Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)

Purchase 40,000
1-1-016 Accounts Payable 40,000
(To record the Purchase for on accounts.)

Freight in 500
2-1-016 Cash 500
(To record Cash paid for freight.)
Accounts Receivable 20,000
3-1-016 Sales 20,000
(To record sales for on account.)
Transportation out 600
4-1-016 Cash 600
(To record Cash paid for transportation out.)
 ......Company
Solution – 01 Journal Entry (Under Periodic Inventory System)
For the month of January, 2016.

Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)

Accounts Payable 4,000
5-1-016 Purchase Return 4,000
(To record the Purchase Return.)
Sales Return 3,000
6-1-016 Accounts Receivable 3,000
(To record the Sales Return.)
Accounts Payable (40,000 – 4,000)
36,000
Purchases discount (36,000 × 2%)
7-1-016 720
Cash (36,000 × 98%) 35,280
(To record the Cash paid to A/P less discount.)
Cash (17,000 × 98%) 16,660
8-1-016 Sales discount 340
Accounts Receivable (20,000 – 3,000) 17,000
(To record the Cash Receipts from A/R less discount)
Problem – 02 Periodic Inventory System
Dawkings Company engaged in the following transactions:
October
1 Purchased merchandise on credit from Rubel Company, terms, n/30, Tk. 1,900.
2 Paid Custom Freight Tk. 145 for freight charges on merchandise received.
2 Sold merchandise to Enamul on credit, terms n/30, Tk. 1,050.
9 Purchased merchandise on credit from Liza Company Tk. 1,800.
11 Accepted from Enamul a return of merchandise, which was returned to inventory, Tk. 150.
14 Returned merchandise of Tk. 300 purchased on October 9.
15 Sold merchandise for cash, Tk. 1,500.
22 Paid Rubel Company for purchase of October 1.
23 Received full payment from Enamul for his October 2 purchase, less return on October 11.

Prepare general journal entries to record the transactions; assuming the Periodical inventory
system is used.
Problem – 03 Buyers & Sellers Basis
The following transactions occurred between Buyers company and Sellers company during
July, 2016:
July
1 Buyer company purchased merchandise from the seller’s company for Tk. 25,000: terms
2/10, n/30, FOB shipping point.
2 The appropriate party paid freight charges of Tk. 100 for the merchandise shipped on July 1.
5 Buyers company returned Tk. 3,000 of merchandise to sellers Co. because they were not
ordered.
7 Buyers Co. received an allowance of Tk. 2,000 from the gross invoice price of July 1
purchases because of defective merchandise.
10 Sellers Co. received payment in full from Buyers Co.
Instructions:
Journalize the above transactions in the books of Buyers Co. and Sellers Co. using: Periodic
inventory system.
 In the books of Buyers Company
Solution – 03 Journal Entries
(Under Periodic inventory system)

Date Account Titles Ref. Dr. (Tk.) Cr. (Tk.)

July 01 Purchase 25,000
Accounts payable 25,000
(Being purchase on account term 2/10, n/30)
02
Freight in
100
Cash
100
(Being payment of freight for goods purchased.)
05
Accounts payable 3,000
Purchased returns and allowances 3,000
07 (Being allowances for defective merchandise)
Accounts Payable 2,000
Purchase returns and allowances 2,000
10 (Being allowances for defective merchandise)

Accounts payable 20,000

Cash 19,600
Purchased discount (20,000 × 2%) 400
(Being payment of accounts payable)
Problem – 04 Buyers & Sellers Basis
The following transactions occurred between Buyers company and Sellers company during
July, 2016:
July
1 Buyer company purchased merchandise from the seller’s company for Tk. 25,000: terms
2/10, n/30, FOB shipping point.
2 The appropriate party paid freight charges of Tk. 100 for the merchandise shipped on July 1.
5 Buyers company returned Tk. 3,000 of merchandise to sellers Co. because they were not
ordered.
7 Buyers Co. received an allowance of Tk. 2,000 from the gross invoice price of July 1
purchases because of defective merchandise.
10 Sellers Co. received payment in full from Buyers Co.
Instructions:
Journalize the above transactions in the books of Buyers Co. and Sellers Co. using: Periodic
inventory system.
 In the books of Buyers Company
Solution – 04
Journal Entries
(Under Periodic inventory system)

Date Account Titles Ref. Dr. (Tk.) Cr. (Tk.)

July 01 Purchase 25,000
Accounts payable 25,000
(Being purchase on account term 2/10, n/30)
02 Freight in 100
Cash 100
(Being payment of freight for goods purchased.)
05 Accounts payable 3,000
Purchased returns and allowances 3,000
(Being allowances for defective merchandise)
07 Accounts Payable 2,000
Purchase returns and allowances 2,000
(Being allowances for defective merchandise)
10 Accounts payable 20,000
Cash 19,600
Purchased discount (20,000 × 2%) 400
(Being payment of accounts payable)
 In the books of Seller's Company
Solution – 04
Journal Entries
(Under Periodic inventory system)

Date Account Titles Ref. Dr. (Tk.) Cr. (Tk.)

July Accounts Receivable 25,000
01 Sales 25,000
(Being sales on account term 2/10, n/30)
Sales returns and allowances 3,000
05 Account Receivable 3,000
(Being sales return and allowances for not to be
ordered)
Sales return and allowance 2,000
07 Accounts Receivable 2,000
(Being payment of allowances for defective
merchandise) 19,600
Cash 400
10 Sales discounts 20,000
Accounts Receivable
(Being receipt of payment)
Problem – 05 Gross & Net-discount Basis
The following transaction were extracted from Farhan Traders:
2016
March
1 Purchase merchandise on account for Tk. 40,000 from "A" Ltd., terms 2/10, n/30. FOB Destination
point.
6 Sold merchandise on account to X Ltd. for Tk. 50,000, terms 2/10, n/30. FOB Shipping point.
10 Purchase merchandise on account for Tk. 20,000 from "B" Ltd., terms 1/10, n/45. FOB Destination
point.
11 Returned for credit Tk. 1,000 of merchandise purchased on March 10.
12 Sold merchandise on account to "Y" Ltd. for Tk. 20,000, terms 2/10, n/30. FOB Shipping point.
18 Paid "A" Ltd. for the purchase of March 1.
19 Received from X Ltd. for the Sale of March- 6.
20 Paid-B Ltd. for the purchase of March 10.
22 Received from Y Ltd. for the Sale of March 12.
Instructions:
Journalize the transactions under Gross Price Method & Net Price Method, assuming Periodical
Inventory System is used.
Solution – 05 Recording Under Periodical Inventory System:
Gross Price Method

Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)

March 1 Purchase 40,000
Accounts Payable – A Ltd. 40,000
(To record the Purchase for on Account.)
6 Accounts Receivable – X Ltd. 50,000
Sales 50,000
(To record the Sales for on Account.)
10 Purchase 20,000
Accounts Payable – B Ltd. 20,000
(To record the Purchase for on Account.)
11 Accounts Payable – B Ltd. 1,000
Purchase Return 1,000
(To record the Purchase Return to B Ltd.)
12 Accounts Receivable – Y Ltd. 20,000
Sales 20,000
(To record the Sales for on Account.)
Solution – 05 Recording Under Periodical Inventory System:
Gross Price Method

Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)

Accounts Payable – A Ltd. 40,000
18 Cash 40,000
(To record Cash paid to Accounts Payable.)
Cash 50,000
19 Accounts Receivable – X Ltd. 50,000
(To record Cash Receipt from – X.)
Accounts Payable – B Ltd. 19,000
20 Purchase Discount (19,000 × 1%) 190
Cash 18,810
(To record Cash paid to Accounts Payable less
discount.)
22 Cash 19,600
Sales discount (20,000 × 2%) 400
Accounts Receivable – Y Ltd. 20,000
(To record Cash Receipt from – Y. Less discount.)
Solution – 05
Recording Under Periodical Inventory System:
Net Price Method
Journal
Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)
Purchase (40,000 × 98%) 39,200
March 1 Accounts Payable – A Ltd. 39,200
(To record the Purchase for on Account.)
Accounts Receivable – X Ltd. 50,000
6 Sales 50,000
(To record the Sales for on Account.)
Purchase (20,000 × 99%) 19,800
10
Accounts Payable – B Ltd. 19,800
(To record the Purchase for on Account.)
11 Accounts Payable – B Ltd. (1,000 × 99%) 990
Purchase Return 990
(To record the Purchase Return to B Ltd.)
Solution – 05 Recording Under Periodical Inventory System:
Net Price Method
Journal
Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)
Accounts Receivable – Y Ltd. 20,000
12 Sales 20,000
(To record the Sales for on Account.)
Accounts Payable – A Ltd. 39,200
18 Discount Loss 800
Cash 40,000
(To record Cash paid to Accounts Payable.)
19 Cash 50,000
Accounts Receivable – X Ltd. 50,000
(To record Cash Receipt from – X.)
20 Accounts Payable – B Ltd. 18,810
Cash 18,810
(To record Cash paid to Accounts Payable less discount.)
Cash
19,600
Sales discount (20,000 × 2%)
22 400
Accounts Receivable – Y Ltd.
20,000
(To record Cash Receipt from – Y. Less discount.)
Problem – 06 Perpetual Inventory System

Prepare the journal entries to record the transactions; assuming the Perpetual inventory system is used
1-1-2016 Merchandise Purchase Tk. 50,000, Term 3/10, n/30.
2-1-2016 Freight charges on Merchandise Purchase Tk. 1,000.
3-1-2016 Merchandise sales Tk. 20,000, Term 2/10, n/30. (Which cost price of Tk. 18,000)
4-1-2016 Transportation out on F.O.B. destination Tk. 800.
5-1-2016 Purchase return of Tk. 5,000.
6-1-2016 Sales Return of Tk. 4,000. (Cost price of Tk. 3,000)
7-1-2016 If Payment was made within discount period.
8-1-2016 If collection was received within the discount period.
Solution – 06 .............Company
Journal Entry. (Under Perpetual Inventory System)
For the month of January, 2016.
Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)
Merchandise Inventory 50,000
1-1-016 Accounts Payable 50,000
(To record the Purchase for on accounts.)
Merchandise Inventory 1,000
2-1-016 Cash 1,000
(To record Cash paid for freight.)
(i) Accounts Receivable 20,000
3-1-016 20,000
Sales
(To record sales for on account.)
(ii) Cost of Goods sold 18,000
18,000
Merchandise Inventory
(To record the cost of goods sold adjust.)
Transportation out 800
800
Cash
4-1-016
(To record Cash paid for transportation out.)
Solution – 06 .............Company
Journal Entry. (Under Perpetual Inventory System)
For the month of January, 2016.
Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)
Accounts Payable 5,000
5-1-016 Merchandise Inventory 5,000
(To record the Purchase Return.)
6-1-016 (i) Sales Return 4,000
Accounts Receivable 4,000
(To record the Sales Return.)
(ii) Merchandise Inventory 3,000
Cost of Goods sold 3,000
(To record the cost of goods sold adjust.)
Accounts Payable (50,000 – 5,000) 45,000
7-1-016 Merchandise Inventory (45,000 × 2%) 900
Cash (45,000 × 98%) 44,100
(To record the Cash paid to A/P less discount.)
Cash (17,000 × 98%) 16,660
8-1-016 Sales discount 340
Accounts Receivable (20,000 – 3,000) 17,000
(To record the Cash Receipts from A/R less discount.)
Problem – 07 Perpetual Inventory System

Nabil Motor car uses a Perpetual inventory system. On 1-6-2016 now car inventory of Tk. 2,00,000
which
"A" model 4 cars TK. 10,000 per car. "B" model 3 cars Tk. 12,000 per car and "C" model 2 car Tk.
16,000 per car. During June the following purchases and sales were made on account:
June
07 Purchased three "A" cars of Tk. 10,000 each.
10 Sold two "A" cars for Tk. 16,000 each.
11 Purchases two "C" cars for Tk. 16,000 each.
14 Sold one "A" car for Tk. 17,000.
20 Purchased two "B" car for Tk. 24,000.
22 Returned one "B" car purchased for Tk. 12,000.
24 Sold three "C" cars for Tk. 18,000 each.
28 Sold one "B" car for Tk. 14,000.
Journalize the transactions using a Perpetual inventory system.
Solution – 07 In the book of NABIL MOTOR CAR
General Journal
(Perpetual inventory system)
Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)
2016 Merchandise Inventory (10,000 × 3) 30,000
June 7 Accounts Payable 30,000
(Being merchandise purchased on account)
10 (i) Accounts Receivable (16,000 × 2) 32,000
Sales 32,000
(Being merchandise sold on account)
(ii) Cost of goods sold (10,000 × 2) 20,000
Merchandise Inventory 20,000
(To record the cost of goods sold adjust.)
11 Merchandise Inventory (16,000 × 2) 32,000
Accounts Payable 32,000
(Being merchandise Purchased on account)
14 (i) Accounts Receivable 17,000
Sales 17,000
(Being merchandise sold on account)
(ii) Cost of goods sold (10,000 × 1) 10,000
Merchandise Inventory 10,000
(To record the cost of goods sold adjust.)
Solution – 07 In the book of NABIL MOTOR CAR
General Journal
(Perpetual inventory system)
Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)
Merchandise Inventory 24,000
20 Accounts Payable 24,000
(Being merchandise purchased on account)
Accounts Payable 12,000
22 Merchandise Inventory 12,000
(Being returned of merchandise)
24 (i) Accounts Receivable (18,000 × 3) 54,000
Sales 54,000
(Being merchandise sold on account)
(ii) Cost of goods sold (16,000 × 3) 48,000
Merchandise Inventory 48,000
(To record the cost of goods sold adjust.)
28 (i) Accounts Receivable 14,000
Sales 14,000
(Being merchandise sold on account)
(ii) Cost of goods sold (12,000 × 1) 12,000
Merchandise Inventory 12,000
(To record the cost of goods sold adjust.)
Problem – 08 Buyers & Sellers Basis

The following transactions occurred between Buyers company and Sellers company during July,
2016:
July
1 Buyer company purchased merchandise from the seller’s company for Tk. 30,000: terms 2/10, n/30,
FOB shipping point.
2 The appropriate party paid freight charges of Tk. 200 for the merchandise shipped on July 1.
5 Buyers company returned Tk. 6,000 of merchandise to sellers Co. because they were not ordered.
7 Buyers Co. received an allowance of Tk. 4,000 from the gross invoice price of July 1 purchases
because of defective merchandise.
10 Sellers Co. received payment in full from Buyers Co.
Assume that, the cost of all merchandise sold was 80% of the sales price.
Instructions:
Journalize the above transactions in the books of Buyers Co. and Sellers Co. using: Perpetual
inventory system.
Solution – 08 In the books of Buyers Company
Journal Entries
(Under Perpetual inventory system)
Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)
Merchandise inventory 30,000
July 01 Accounts payable 30,000
(Being purchase on account term 2/10, n/30)
Merchandise inventory 200
02 Cash 200
(Being payment of freight for goods purchased.)
Accounts payable 6,000
05 Merchandise inventory 6,000
(Being allowances for defective merchandise)
Accounts Payable 4,000
07 Merchandise inventory 4,000
(Being allowances for defective merchandise)
Accounts payable 20,000
10 Cash 19,600
Merchandise inventory (20,000 × 2%) 400
(Being payment of accounts payable)
 In the books of Seller's Company
Solution – 08 Journal Entries
(Under Perpetual inventory system)
Date Account Titles Ref. Dr. (Tk.) Cr. (Tk.)
July 01 Accounts Receivable 30,000
Sales 30,000
(Being sales on account term 2/10, n/30)
(ii) Cost of goods sold (30,000 × 80%) 24,000
Merchandise Inventory 24,000
(To record the merchandise adjust.)
05 (i) Sales returns and allowances 6,000
Account Receivable 6,000
(Being sales return and allowances for not to be ordered)
(ii) Cost of goods sold (6,000 × 80%) 4,800
Merchandise Inventory 4,800
(To record the cost of goods sold adjust with cost price.)
07 Sales return and allowance 4,000
Accounts Receivable 4,000
(Being payment of allowances for defective merchandise)
(ii) Cost of goods sold (4,000 × 80%) 3,200
Merchandise Inventory 3,200
(To record the cost of goods sold adjust with cost price.)
10 Cash 19,600
Sales discounts (20,000 × 2%) 400
Accounts Receivable (30,000 – 6,000 – 4,000) 20,000
(Being receipt of payment)
Problem – 09 Gross & Net-discount Basis
The following transaction were extracted from Farhan Traders:
2016
March
1 Purchase merchandise on account for Tk. 20,000 from X Ltd., terms 2/10, n/30. FOB Destination
point.
6 Sold merchandise on account to P Ltd. for Tk. 30,000, terms 2/10, n/30. FOB Shipping point. (Cost 25,000)
10 Purchase merchandise on account for Tk. 10,000 from Y Ltd., terms 1/10, n/45. FOB Destination
point.
11 Returned for credit Tk. 500 of merchandise purchased on March 10.
12 Sold merchandise on account to Q Ltd. for Tk. 12,000, terms 2/10, n/30. FOB Shipping point. (Cost
10,000)
18 Paid X Ltd. for the purchase of March 1.
19 Received from P Ltd. for the Sale of March- 6.
20 Paid Y Ltd. for the purchase of March 10.
22 Received from Q Ltd. for the Sale of March 12.
Instructions:
Journalize the transactions under Gross Price Method & Net Price Method, assuming Perpetual Inventory
System is used.
Solution – 09 Recording Under Perpetual Inventory System:
Gross Price Method
Journal
Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)
March 1 Merchandise inventory 20,000
Accounts Payable – X Ltd. 20,000
(To record the Purchase for on Account.)
6 (i) Accounts Receivable – P Ltd. 30,000
Sales 30,000
(To record the Sales for on Account.)
(ii) Cost of goods sold 25,000
Merchandise inventory 25,000
(To record the cost of goods sold adjust.)
10 Merchandise inventory 10,000
Accounts Payable – Y Ltd. 10,000
(To record the Purchase for on Account.)
11 Accounts Payable – Y Ltd. 500
Merchandise inventory 500
(To record the Purchase Return to B Ltd.)
Solution – 09 Recording Under Perpetual Inventory System:
Gross Price Method
Journal
Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)
12 (i) Accounts Receivable – Q Ltd. 12,000
Sales 12,000
(To record the Sales for on Account.)
(ii) Cost of goods sold 10,000
Merchandise inventory 10,000
(To record the cost of goods sold adjust.)
18 Accounts Payable – X Ltd. 20,000
Cash 20,000
(To record Cash paid to Accounts Payable.)
19 Cash 30,000
Accounts Receivable – X Ltd. 30,000
(To record Cash Receipt from – X.)
20 Accounts Payable – Y Ltd. 9,500
Purchase Discount (9,500 × 1%) 95
Cash 9,450
(To record Cash paid to Accounts Payable less discount.)
22 Cash 11,760
Sales discount (12,000 × 2%) 240
Accounts Receivable – Q Ltd. 20,000
(To record Cash Receipt from – Q. Less discount.)
Solution – 09 Recording Under Perpetual Inventory System:
Net Price Method
Journal
Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)
March 1 Merchandise inventory (20,000 × 98%) 19,600
Accounts Payable – X Ltd. 19,600
(To record the Purchase for on Account.)
6 (i) Accounts Receivable – P Ltd. 30,000
Sales 30,000
(To record the Sales for on Account.)
(ii) Cost of goods sold 25,000
Merchandise inventory 25,000
(To record the cost of goods sold adjust.)
10 Merchandise inventory (10,000 × 99%) 9,900
Accounts Payable – Y Ltd. 9,900
(To record the Purchase for on Account.)
11 Accounts Payable – Y Ltd. (500 × 99%) 495
Merchandise inventory 495
(To record the Purchase Return to Y Ltd.)
Solution – 09 Recording Under Perpetual Inventory System:
Net Price Method
Journal
Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)
12 Accounts Receivable – Q Ltd. 12,000
Sales 12,000
(To record the Sales for on Account.)
(ii) Cost of goods sold 10,000
Merchandise inventory 10,000
(To record the cost of goods sold adjust.)
18 Accounts Payable – X Ltd. 19,600
Discount Loss (20,000 – 19,600) 400
Cash 20,000
19 (To record Cash paid to Accounts Payable.)
Cash 30,000
Accounts Receivable – X Ltd. 30,000
20 (To record Cash Receipt from – X.)
Accounts Payable – Y Ltd. (9,900 – 495) 9,405
Cash 9,405
(To record Cash paid to Accounts Payable less discount.)
22 Cash 11,760
Sales discount (12,000 × 2%) 240
Accounts Receivable – Q Ltd. 12,000
(To record Cash Receipt from – Q. Less discount.)
Problem – 10 LIFO, FIFO & Average Method

Perpetual inventory [DU. BBA - 2017; NU. BBA (Hons.) - 2008]

The inventory records of Coral company show the following:
January
1 Beginning inventory consists of 12 units costing Tk. 48 per unit.
5 Purchased 15 units @ Tk. 49 per unit.
10 Sold 9 units @ Tk. 108 per unit.
12 Sold 7 units @ Tk. 108 per unit.
20 Purchased 20 units @ Tk. 50 per unit.
22 Purchased 5 units @ Tk. 51 Per unit.
30 Sold 20 units @ Tk. 110 per unit.
Assume all purchases and sales are made on account.
Required:
(i) Using FIFO perpetual inventory procedure, compute cost of goods sold for January.
(ii)Using FIFO perpetual inventory procedure, prepare the journal entries for January.
 In the book of Coral company
Solution – 10 Store Ledger Account
Required-(i): (FIFO Method)
Purchase Cost of goods sold Inventory Balance
Date
Unit Rate Total Tk. Unit Rate Total Tk. Unit Rate Total Tk.
Jan. 1 12 48 576
12 48 576
5 15 49 735
15 49 735
3 48 144
10 9 48 432
15 49 735
3 48 144
12 11 49 539
4 49 196
11 49 539
20 20 50 1,000
20 50 1,000
11 49 539
22 5 51 255 20 50 1,000
5 51 255
11 49 539 11 50 550
30
9 50 450 5 51 255
36 1761
Total cost of goods sold for January = TK. 1,761
 In the books of Coral Company
Solution – 10
Journal Entries
Required-(ii): (Under FIFO perpetual inventory system)

Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)

Jan. 05 Merchandise Inventory (15 × 49) 735 735
Accounts Payable
(Being purchase for on account)
10 Accounts Receivable (9 × 108) 972 972
Sales
(Being sales for on account)
10 Cost of Goods Sold (49 × 48) 432 432
Merchandise Inventory
(Being cost of goods sold adjust)
12 Account Receivable (7 × 108) 756 756
Sales
(Being sales for on account)
12 Cost of Goods Sold (3 × 48) + (4 × 49) 340 340
Merchandise Inventory
(Being cost of goods sold adjust)
Solution – 10 In the books of Coral Company
Journal Entries
Required-(ii):
(Under FIFO perpetual inventory system)

Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)

20 Merchandise Inventory (20 × 50) 1,000
Accounts payable 1,000
(Being purchases for on account.)
22 Merchandise Inventory (5 × 51) 255
Accounts Payable 255
(Being purchases for on account.)
30 Accounts Receivables (20 × 110) 2,200
Sales 2,200
(Being sales for on account)
30 Cost of Goods Sold (11 × 49) + (9 × 50) 989
Merchandise Inventory 989
(Being cost-of goods sold adjust)
Problem – 11 Periodic inventory system
Mamun Co. is a retailer dealing in a single product. Beginning inventory at January-1 of this year is Zero, operating
expenses for this same year are Tk. 10,000 and there are 1,000 common shares out-standing. The following purchases are
made this year:
Month Units Rate Per Unit Cost
January 200 20 4,000
March 300 10 3,000
June 600 10 6,000
October 300 12 3,600
December 600 15 9,000
Total 2,000 25,600

Ending inventory at December 31 is 500 units. End of the year assets, excluding inventories. Amount to Tk. 80,000. of which
Tk. 60,000 of the Tk. 80,000 are current. Current liabilities amount to Tk. 35,000 and long-term liabilities equal Tk. 20,000.
Required:
Determine the net income for this year under each of the following inventory methods. Assume a sales
price of Tk. 30 per unit and ignore income taxes.
(1) FIFO, (2) LIFO, (3) Average cost.
Solution – 11 Calculation of Income Statement
Particular FIFO LIFO Average
Sales (1,500 × 30) 45,000 45,000 45,000
Less: Cost of goods sold
Opening stock 0 0 0
Add: Purchase 25,600 25,600 25,600
25,600 25,600 25,600
Less: Closing inventory (7,500) (7,000) (6,400)
Cost of goods sold (CGS)
18,100 18,600 19,200
Gross profit (Sales – CGS)
Working - (1): Calculation of Sales units. 26,900 26,400 25,800
Sales = (2,000 – 500) = 1,500 Units. Less: Operating expense
EAT/ Net profit (10,000) (10,000) (10,000)
Working - (2): Calculation of Closing
inventory: Number of share 16,900 16,400 15,800
(1) FIFO method: (500 × 15) = 7,500. EPS = 1,000 1,000 1,000
(2) LIFO method: (200 × 20) + (300 × 10) =
(4,000 + 3,000) = 7,000.
16.90 16.40 15.80
(3) Average cost method: (25,600 ÷ 2,000) ×
500 = 6,400.
Problem – 12 Periodic inventory system
Limon Beverage Distributors specializes in soft drinks. The business began operations on 1 January
2010, with an inventory of 400 cases of soft drinks that cost Tk. 20.10 each. During the first month
of operations, Limon purchased Inventory as follows:

Purchase No. 1 60 cases @ Tk. 21.00 each

Purchase No. 2 120 cases @ Tk. 23.50 each

Purchase No. 3 600 cases @ Tk. 25.00 each

Purchase No. 4 40 bases @ Tk. 26.55 each

The ending Inventory consists of 500 cases of soft drinks.

Required:
Complete the following tabulation:
(a) Ending Inventory, (b) Cost of Goods Sold:
(i) Average cost; (ii) FIFO costs; (iii) LIFO cost.
Solution – 12 Limon Beverage Distributors
Required-(i): Average Cost Method
Average cost:
Purchase Cost of goods sold Balance
Date
Unit Rate Amount Unit Rate Amount Unit Rate Amount
2010 400 20.10 8,040
Jan. 1
400 20.10 8,040
60 21.00 1,260 60 21.00 1,260
120 23.50 2,820 120 23.50 2,820
600 25.00 15,000 600 25.00 15,000
40 26.55 1,062 40 26.55 1,062
720 23.10 16,632
Jan. 31 500 23.10 11,550

Working— (i): Cost per unit: (28,182 ÷ 1,220) = 23.10 (p u)

(a) Ending Inventory: (500 × 23.10) = 11,550
(b) Cost of goods sold: (720 × 23.10) = Tk. 16,632.
Solution – 12 Limon Beverage Distributors
Required—(ii): FIFO Cost Method
FIFO Cost:
Purchase Cost of goods sold Inventory Balance
Date
Unit Rate Amount Unit Rate Amount Unit Rate Amount
2010 400 20.10 8,040
Jan. 1
400 20.10 8,040
60 21.00 1,260 60 21.00 1,260
120 23.50 2,820 120 23.50 2,820
600 25.00 15,000 600 25.00 15,000
40 26.55 1,062 40 26.55 1,062
Jan. 31 400 20.10 8,040
60 21.00 1,260
120 23.50 2,820 460 25.00 11,500
140 25.00 3,500 40 26.55 1,062
720 15,620 500 12,562
(a) Ending Inventory: (500 units) = 12,562
(b) Cost of goods sold: (720 units) = Tk. 15,620.
Solution – 12 Limon Beverage Distributors
Required-(3): LIFO Cost Method
Purchase Cost of goods sold Inventory Balance
Date
Unit Rate Amount Unit Rate Amount Unit Rate Amount
2010 400 20.10 8,040
Jan. 1
400 20.10 8,040
60 21.00 1,260 60 21.00 1,260
120 23.50 2,820 120 23.50 2,820
600 25.00 15,000 600 25.00 15,000
40 26.55 1,062 40 26.55 1,062
Jan. 31 40 26.55 1,062
600 25.00 15,000 400 20.10 8,040
80 23.50 1,880 60 21.00 1,260
40 23.50 940
720 17,942 500 10,240

(a) Ending Inventory: (500 units) = 10,240

(b) Cost of goods sold: (720 units) = Tk. 17,942.
Problem – 13 Periodic inventory system
Lima Varieties Distributors specializes in soft drinks. The business began operations on 1 January
2016, with an inventory of 500 cases of soft drinks that cost Tk. 20.00 each. During the first month
of operations, Lima purchased inventory as follows:
Purchase No. 1 100 cases @ Tk. 21.00 each
Purchase No. 2 200 cases @ Tk. 22.00 each
Purchase No. 3 600 cases @ Tk. 25.00 each
Purchase No. 4 400 cases @ Tk. 26.00 each

The ending inventory consists of 600 cases of soft drinks.

Required:
Complete the following tabulation:
(a) Ending Inventory (b) Cost of Goods Sold (c) Gross profit, when sales price @ TK.40.
(i) Average Cost; (ii) FIFO Cost; (iii) LIFO Cost.
Solution – 13 Required – (i) Lima Varieties Distributors
Average Cost: Average Cost Method
Purchase Cost of goods sold Inventory Balance
Date
Unit Rate Amount Unit Rate Amount Unit Rate Amount
2016 500 20.00 10,000
Jan. 1
Purchase 500 20.00 10,000
No. 1 100 21.00 2,100 100 21.00 2,100
No. 2 200 22.00 4,400 200 22.00 4,400
No. 3 600 25.00 15,000 600 25.00 15,000
No. 4 400 26.00 10,400 400 26.00 10,400
Sales 1,200 23.28 27,936

Jan. 31 600 23.28 13,936

Working— (i): Cost per unit: (41,900 ÷ 1,800) = 23.28 (p u)
(a) Ending Inventory: (600 × 23.28) = 13,968.
(b) Cost of goods sold: (1,200 × 23.28) = Tk. 27,936.
(c) Gross Profit = Total Sales – Cost of goods sold
= (1,200 × 40) – 27,936 = 48,000 – 27,936 = 20,064.
Solution – 13 Required – (ii) Lima Varieties Distributors
FIFO Cost Method
Purchase Cost of goods sold Inventory Balance
Date
Unit Rate Amount Unit Rate Amount Unit Rate Amount
2016 500 20.00 10,000
Jan. 1
Purchase 500 20.00 10,000
No. 1 100 21.00 2,100 100 21.00 2,100
No. 2 200 22.00 4,400 200 22.00 4,400
No. 3 600 25.00 15,000 600 25.00 15,000
No. 4 400 26.00 10,400 400 26.00 10,400
Sales 500 20.00 10,000
100 21.00 2,100
200 22.00 4,400
400 25.00 10,000
Jan. 31 200 25.00 5,000
400 26.00 10,400
12,000 26,500 600 15,400

(a) Ending Inventory: (600 units) = 15,400

(b) Cost of goods sold: (1,200 units) = Tk. 26,500
(c) Gross Profit = Total sales – Cost of goods sold.
= (1,200 × 40) – 26,500 = 48,000 – 26,500 = 21,500.
Solution – 13 Required – (iii) Lima Varieties Distributors
LIFO Cost Method
Purchase Cost of goods sold Inventory Balance
Date
Unit Rate Amount Unit Rate Amount Unit Rate Amount
2016 500 20.00 10,000
Jan. 1
Purchase 500 20.00 10,000
No. 1 100 21.00 2,100 100 21.00 2,100
No. 2 200 22.00 4,400 200 22.00 4,400
No. 3 600 25.00 15,000 600 25.00 15,000
No. 4 400 26.00 10,400 400 26.00 10,400
Sales 400 26.00 10,400
600 25.00 15,000
200 22.00 4,400
Jan. 31 500 20.00 10,000
100 21.00 2,100
12,000 29,800 600 12,100
(a) Ending Inventory: (600 units) = 12,100
(b) Cost of goods sold: (1,200 units) = Tk. 29,800.
(c) Gross Profit = Total sales – Cost of goods sold.
= (1,200 × 40) – 29,800 = 48,000 – 29,800 = 18,200
Problem – 14
Gerand D. Engelhard Company uses a perpetual inventory system. The Co. has the same inventory,
Purchase, and sales data for the month of March as shown:

Inventory March-1 200 units @ Tk. 4.00 Tk. 800

Purchase 10 500 units @ Tk. 4.50 Tk. 2,250
20 400 units @ Tk. 4.75 Tk. 1,900
30 300 units @ Tk. 5.00 Tk. 1,500
Sales 15 500 units
25 400 units

The physical inventory count on March 31 shows 500 units on hand.

Instructions:
Determine the cost of inventory on hand at March 31, Cost of goods sold for March 31,
under (i) FIFO, (ii) LIFO.
 In the book of Gerand D. Engelhard Co.'s
Solution – 14 Required – (i)
Store Ledger
Under FIFO Method

Purchase Cost of goods sold Inventory Balance

Date
Unit Rate Amount Unit Rate Amount Unit Rate Amount
March 1 200 4.00 800
10 500 4.50 2,250 200 4.00 800
500 4.50 2,250
15 200 4.00 800 200 4.50 900
300 4.50 1,350
20 400 4.75 1,900 200 4.50 900
400 4.75 1,900
25 200 4.50 1,850 200 4.75 950
200 4.75 950
30 300 5.00 1,500 200 4.75 950
300 5.00 1,500
Total 1,200 5,650 900 4,000 500 2,450

Total cost of goods sold at 31st March = Tk. 4,000

Total Cost of inventory on hand 31st March = Tk. 2,450
 In the book of Gerand D. Engelhard Co.'s
Solution – 14 Required – (ii)
Store Ledger
Under LIFO Method

Purchase Cost of goods sold Inventory Balance

Date
Unit Rate Amount Unit Rate Amount Unit Rate Amount
March 1 200 4.00 800
10 500 4.50 2,250 200 4.00 800
500 4.50 2,250

15 500 4.50 2,250 200 4.00 800

20 400 4.75 1,900 200 4.00 800
400 4.75 1,900

25 400 4.75 1,900 200 4.00 800

30 300 5.00 1,500 200 4.00 800
300 5.00 1,500

Total 1,200 5,650 900 4,150 500 2,300

Total cost of goods sold at 31st March = Tk. 4,150

Total Cost of inventory 31st March = Tk. 2,300
Problem – 15
Droog Co is a retailer dealing in a single product. Beginning inventory at January-1 of this year is
Zero, operating expenses for this same year are Tk. 5,000. and there are 2,000 common shares out-
standing. The following purchases are made this year:
Month Units Rate Per unit Cost
January 100 10 1,000
March 300 11 3,300
June 600 12 7,200
October 300 14 4,200
December 500 15 7,500
Total 1,800 23,200

Ending inventory at December 31 is 800 units. End of the year assets, excluding inventories. Amount to Tk.
75,000. of which Tk. 50,000 of the Tk. 75,000 are current. Current liabilities amount to Tk. 25,000. and long-term
liabilities equal Tk. 10,000.
Required:
Determine the net income for this year under each of the following inventory methods. Assume a sales
price of Tk. 25 per unit and ignore income taxes.
(1) FIFO, (2) LIFO, (3) Average cost.
Solution – 15 Calculation of Income Statement
Particular FIFO LIFO Average
Sales (1,000 × 25) 25,000 25,000 25,000
Less: Cost of goods sold
Opening stock 0 0 0
Add: Purchase 23,200 23,200 23,200

Less: Closing inventory 23,200 23,200 23,200

Cost of goods sold (CGS) (11,700) (9,100) (10,311)
Less: Operating expense 11,500 14,100 12,889
EAT/ Net profit (5,000) (5,000) (5,000)
Number of share 8,500 5,900 7,111
EPS =
2,000 2,000 2,000
4.25 2.95 3.56
Working-(1): Calculation of Sales units.
Sales = (1,800 – 800) = 1,000 Units.
Working-(2): Calculation of Closing inventory:
(1) FIFO method: (300 × 14) + (500 × 15) = 4,200 + 7,500 = 11,700.
(2) LIFO method: (100 × 10) + (300 × 11) + (400 × 12) = (1,000 + 3,300 + 4,800) = 9,100
(3) Average cost method: (23,200 ÷ 1,800) × 800 = 10,311
Problem – 16 Mixed Problem [DU. BBA - 2016]
Carlos Hardware Store completed the following merchandising transactions in the month of May. At the beginning of
May, the ledger of Carlos showed Cash of Tk. 5,000 and Carlos, Capital of Tk. 5,000.
May
1 Purchased merchandise on account from Depot Wholesale Supply Tk. 6,000 terms 2/10, n/30.
2 Sold merchandise on account, to Rina, Tk. 4,500 terms 2/10, n/30. The cost of the merchandise sold was Tk. 3,000.
5 Received Credit from Depot Wholesale Supply for merchandise returned Tk. 200.
9 Received collections in full, less discounts, from customers billed on sales of Tk. 4,500 on May 2.
10 Paid Depot Wholesale Supply in full, less discount.
11 Purchased merchandise for cash Tk. 900.
12 Purchased merchandise for cash Tk. 2,400
15 Received refund for poor quality merchandise from supplier on cash purchase Tk. 230.
17 Purchased merchandise from Harlow Distributors Tk. 1,900 FOB, shipping point, terms 2/10, 1/30.
19 Paid freight on May 17 purchased Tk. 250.
24 Sold merchandise for Cash Tk. 6,200. The merchandise sold had a cost of Tk. 4,340.
25 Purchased merchandise from Horicon Inc. Tk. 1,000 FOB destination, terms 2/10, n/30.
27. Paid Harlow Distributors in-full, less discount.
29 Made refunds to cash customers for defective merchandise Tk. 100. The returned merchandise had a cost of Tk. 70.
31 Sold merchandise on account Tk. 1,600, terms n/30. The cost of the merchandise sold was Tk. 1,120.
Instructions:
Journalize the transactions using a perpetual inventory system.
Solution – 16
GENERAL JOURNAL
Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)
May 1 Merchandise inventory 6,000
Accounts Payable – Depot Wholesale supply 6,000
(Being merchandise purchase from depot wholesale supply, term
2/10, n/30)
2 Account Receivable – Rina 4,500
Sales 4,500
(Being sales merchandise terms 2/10, n/30)
2 Cost of goods sold 3,000
Merchandise inventory 3,000
(Being cost of goods sold)
5 Accounts Payable – Depot wholesale supply 200
Merchandise inventory 200
(Being purchase return to depot wholesale)
9 Cash 4,410
Sales Discounts (4,500 × 2%) 90
Accounts Receivable – Rina 4,500
(Being Collection in full within discount period)
Solution – 16
GENERAL JOURNAL
Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)
10 Accounts payable – Depot wholesale supply 5,800
Cash 5,684
Merchandise inventory (5,800 × 2%) 116
(Being payment within discount period)
11 Merchandise inventory 900
Cash 900
(Being purchased Merchandise on cash)
12 Merchandise inventory 2,400
Cash 2,400
(Being purchased merchandise on cash)
15 Cash 230
Merchandise inventory 230
(Being cash received for refund merchandise)
17 Merchandise inventory 1,900
Accounts Payable – Harlow Distributors 1,900
(Being purchased merchandise from Harlow Distributor terms,
FOB shipping point, terms 2/10, n/30)
Solution – 16
GENERAL JOURNAL
Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)
19 Merchandise inventory 250
Cash 250
(Being Freight cost for purchase)
24 Cash 6,200
Sales 6,200
(Being sales merchandise on cash)
Cost of goods sold 4,340
Merchandise inventory 4,340
(Being cost of goods sold)
25 Merchandise Inventory 1,000
Accounts Payable – Horicon Inc. 1,000
(Being purchased Merchandise from Horicon Inc. terms, FOB
destination and 2/10, n/30)
27 Accounts payable – Harlow distributor 1,900
Cash 1,862
Merchandise inventory (1,900 × 2%) 38
(Being payment with in discount period)
Solution – 16
GENERAL JOURNAL
Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)
29 Sales Returns and Allowances 100
Cash 100
(Being payment cash for return goods)
29 Merchandise Inventory 70
Cost of goods sold 70
(Being cost of return goods)
31 Accounts Receivable 1,600
Sales 1,600
(Being Sales Merchandise on Accounts teems n/30)
31 Cost of goods sold 1,120
Merchandise inventory 1,120
(Being cost of goods sold)