Question 4.1
The following transactions appeared in the books of QwaQwa Traders during January 20.24
Transactions:
1. Credit sales to P Pan, R7 720
2. Purchased inventory on credit from Jackson & Jackson, R2 100
3. Paid freight on goods purchased, R100
4. The owner took goods for private use, marked R210 (cost R158)
5. P Pan returned some of the goods purchased in no 1, R520. Issued a credit note.
Required:
a) Record the transactions in the general journal of QwaQwa Traders if the periodic inventory system is used (omit narrations).
b) Suppose QwaQwa Traders uses a gross profit percentage of 25% on sales. Record the transactions in the general journal if the perpetual inventory system is used (omit narrations).
NB: Number the questions and transactions clearly
a) General Journal (using periodic inventory system):
1. Date: January 20
Accounts Receivable 7,720
Sales 7,720
2. Date: January 20
Inventory 2,100
Accounts Payable 2,100
3. Date: January 20
Freight Expense 100
Accounts Payable 100
4. Date: January 20
Drawings 210
Inventory 158
Purchases 158
5. Date: January 20
Sales Returns and Allowances 520
Accounts Receivable 520
b) General Journal (using perpetual inventory system and gross profit percentage of 25%):
1. Date: January 20
Accounts Receivable 7,720
Sales 7,720
Cost of Goods Sold 5,787.50*
Inventory 5,787.50
2. Date: January 20
Inventory 2,100
Accounts Payable 2,100
3. Date: January 20
Freight Expense 100
Accounts Payable 100
4. Date: January 20
Drawings 210
Inventory 158
Purchases 158
5. Date: January 20
Sales Returns and Allowances 520
Accounts Receivable 520
Cost of Goods Sold 390*
Inventory 390
* Calculated as follows:
Cost of Goods Sold = (Credit Sales - Beginning Inventory) / (1 + Gross Profit Percentage)
Cost of Goods Sold = (7,720 - 0) / (1 + 0.25) = 5,787.50
Cost of Goods Returned = (Sales Returns - Cost of Goods Sold) = 520 - 390 = 130