ACCT2542

ACCT2542 – Week 1 – Self Study Module
Basic Journal Revision Questions & Solutions
The learning objectives for this self study are:
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To test whether you have a solid understanding of basic journal entries and key concepts covered in ACCT 1501 to ensure that you are prepared for ACCT 2542.
To be able to work through the exercises WITHOUT looking at the solution. Once you have completed the exercises then check your work to the solution for accuracy.

Accounting for Inventory - (Reference: Trotman and Gibbins (2005) – Section 7.2, pp. 342-346)
Problem 7.8 – Trotman and Gibbins (2005)

Barber Ltd has the following data for a recent period:
$
12,000
30,000
46,200
7,000
5,500

Beginning inventory
Purchases (all credit)
Sales (all credit)
Ending inventory count
Operating expenses (all cash)
The company’s mark-up is 40% on cost

Assuming all purchases and sales were in single transactions prepare summary journal entries as well as closing entries using:
1. perpetual inventory
2. periodic inventory

1

Solution to 7.8
Barber Ltd
General Journal
(Perpetual Inventory Method)
$
30 000

Inventory
Accounts payable

$
30 000

Credit purchases during the period

Accounts receivable
Sales revenue

46 200
46 200

Sales on credit during the period

Cost of goods sold expense
Inventory

33 000
33 000

Cost of goods expense: 40% mark up - 46 200 x 100/140 = $33 000

Inventory shortage expense
Inventory

2 000
2 000

Shortage: Records show inventory should be $12 000 + 30 000 – $33 000 = $9000, but only $7000 on hand

Operating expenses
Cash

5 500
5 500

Expenses paid in cash

Profit and loss summary
Cost of goods sold expense
Inventory shortage expense
Operating expenses

40 500
33 000
2 000
5 500

Closing entry

Sales revenue
Profit and loss summary

46 200
46 200

Closing entry

Profit and loss summary
Retained profits

5 700
5 700

Transfer of net profit

2