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

question 59

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.)
$$\begin{array} { | l | l | l | l | } \hline 1 & \text { Cash } & 50 & \text { Sales } \\\hline 2 & \text { Accounts Receivable } & 60 & \text { Cost of Goods Sold } \\\hline 5 & \text { Inventory } & 99 & \text { Income Summary } \\\hline 30 & \text { Accounts Payable } & & \\\hline 40 & \text { Retained Earnings } & & \\\hline\end{array}$$ $$\begin{array} { | l | l | l | l | } \hline & & \text { Account(s) } & \text { Account(s) } \\\hline & \text { Transactions } & \text { Debited } & \text { Credited } \\\hline & \text { Example: Sold merchandise for cash } & 1,60 & 50,5 \\\hline \text { A } & \text { Purchased merchandise on account } & & \\\hline \text { B } & \text { Sold merchandise on account } & & \\\hline \text { C } & \begin{array} { l } \text { Paid the supplier of the merchandise in transaction } \\\text { A }\end{array} & & \\\hline \text { D } & \text { Collected cash from the customer in transaction B } & & \\\hline \text { E } & \begin{array} { l } \text { The physical inventory at year-end disclosed a } \\\text { normal amount of inventory shrinkage }\end{array} & & \\\hline \text { F } & \text { Made an entry to close the Revenue account } & & \\\hline \text { G } & \begin{array} { l } \text { Made an entry at year-end to close the Cost of } \\\text { Goods Sold account }\end{array} & & \\\hline \text { H } & \begin{array} { l } \text { Closed the Income Summary account at the end of } \\\text { an unprofitable year }\end{array} & & \\\hline\end{array}$$

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The numeral system of digits used globally (0, 1, 2, 3, etc.), originating from the Arabic-speaking world and now common in most countries.

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