goods in transit, purchased on credit and shipped FOB destination. $10000 . were included in purchases but not in the ending inventory? how would you write this journal entry.( this company uses periodic inventory.
To write the journal entry for goods in transit purchased on credit and shipped FOB destination, you need to consider that the company uses periodic inventory. Periodic inventory is a periodic tracking method where a physical count of inventory is performed at specific intervals, such as the end of an accounting period.
In this case, goods in transit are typically not included in the ending inventory because they have not yet arrived at the company's location. However, they should still be recorded as part of the purchases during the accounting period.
Here's how you can write the journal entry:
1. Debit Purchases: In this entry, you will debit the Purchases account to recognize the increase in inventory due to the purchase of goods in transit. Assuming the purchase was made on credit for $10,000, the journal entry would be:
Purchases $10,000
Credit $10,000
2. No entry for Ending Inventory: Since the goods are still in transit and have not yet arrived, they will not be included in the ending inventory. You do not need to make an entry to account for this.
Remember, this journal entry only reflects the purchase of goods in transit, not their eventual arrival and inclusion in the ending inventory. Once the goods arrive at the destination, a separate journal entry will be required to record the increase in inventory and corresponding decrease in purchases.