Perpetual Inventory System: Transactions and Closing Entries Danny's Wholesale Company

question 34

Essay

Perpetual inventory system: transactions and closing entries Danny's Wholesale Company uses a perpetual inventory system. A partial chart of accounts is shown below, followed by a series of merchandising transactions. Indicate the accounts that should be debited and credited in recording each transaction. (Ignore sales taxes.)
$$\begin{array} { | l | l | l | l | } \hline 1 & \text { Cash } & 50 & \text { Sales } \\\hline 2 & \text { Accounts Receivable } & 60 & \text { Cost of Goods Sold } \\\hline 5 & \text { Inventory } & 99 & \text { Income Summary } \\\hline 30 & \text { Accounts Payable } & & \\\hline 40 & \text { Retained Earnings } & & \\\hline\end{array}$$

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Definitions:

Financial Asset

Any asset that is cash, an equity instrument of another entity, or a contractual right to receive cash or another financial asset.

Expected Future Cash Flows

The estimated amount of money that will be brought in and out of a business or investment in future periods, often used in discounting to assess valuation.

Stockholders

Individuals or entities that own shares in a corporation, giving them partial ownership and possibly dividends.

Maximize Shareholder Wealth

The primary objective of a company to increase the value of its shares held by its shareholders.