Inventory and cost of goods: journal entry worksheet
Name: Date:
Convention: United States (US textbooks)
Record each transaction as a journal entry: write each account in the Debit or the Credit column with its amount.
Recording the month’s cost of goods sold in one entry
During the month a store sold 120 units of product A, which cost $15.50 each, and 80 units of product B, which cost $22.50 each. The sales have already been recorded. Record the cost of goods sold for the month.
Assumptions: Perpetual inventory: purchases are recorded in Inventory, and the cost of goods sold is recorded once a month, in one entry, from the inventory records.
Accounts to choose from: Accounts Payable · Cash · Sales Revenue · Cost of Goods Sold · Inventory · Accounts Receivable
Account Debit Credit Period-end cost of goods sold under the periodic system
A store’s inventory was $24,000.00 at the start of the year, and its purchases for the year, recorded in Purchases, were $96,000.00. At year end the physical count values the goods on hand at $20,500.00. Record the year-end entry for cost of goods sold.
Assumptions: Periodic inventory: purchases are recorded in Purchases and Inventory is updated only at year end. Cost of goods sold is recorded with an adjusting entry, not through Income Summary. There is no freight-in and there are no purchase returns or discounts.
Accounts to choose from: Accounts Payable · Cost of Goods Sold · Inventory · Purchases · Sales Revenue · Cash
Account Debit Credit Writing inventory down to net realizable value
At year end a store still holds 60 units of a discontinued product, bought at $85.00 each. They can now be sold for only $70.00 each, and selling them will cost $5.00 per unit. Record the write-down of these goods.
Assumptions: Perpetual inventory: each sale also records its cost of goods sold. Inventory is measured at the lower of cost and net realizable value, item by item. The write-down is credited directly to Inventory (no allowance account).
Accounts to choose from: Cash · Cost of Goods Sold · Accumulated Depreciation—Equipment · Depreciation Expense · Sales Revenue · Inventory · Loss on Inventory Write-Down
Account Debit Credit Using goods from stock as office supplies
A stationery store takes 24 packs of printer paper from its merchandise and uses them in its own office. Each pack cost $4.50.
Assumptions: Perpetual inventory: each sale also records its cost of goods sold. The paper is used up at once.
Accounts to choose from: Inventory · Accounts Payable · Cost of Goods Sold · Supplies Expense · Cash · Sales Revenue
Account Debit Credit Paying freight-out on goods sold
A store ships goods it has sold to a customer under FOB destination terms and pays the carrier $320.00 in cash for the delivery.
Assumptions: The delivery cost is not charged on to the customer.
Accounts to choose from: Cash · Sales Revenue · Cost of Goods Sold · Accounts Payable · Inventory · Freight-Out
Account Debit Credit Returning damaged goods for a cash refund
Last week a store bought 50 units of merchandise at $35.00 each and paid in cash. Today it returns 4 damaged units to the supplier, who refunds their cost in cash.
Assumptions: Perpetual inventory: each sale also records its cost of goods sold.
Accounts to choose from: Sales Revenue · Cost of Goods Sold · Accounts Receivable · Cash · Accounts Payable · Inventory
Account Debit Credit Purchase discount taken, reducing inventory
A store bought merchandise on account for $7,000.00, terms 2/10, n/30, and recorded it in Inventory at the invoice price. It pays the supplier by check within the discount period.
Assumptions: Perpetual inventory: each sale also records its cost of goods sold.
Accounts to choose from: Inventory · Cash · Purchase Discounts · Interest Revenue · Cost of Goods Sold · Accounts Payable · Purchases
Account Debit Credit Recording an inventory count surplus
At year end a store’s inventory records show merchandise costing $31,500.00, but the physical count finds goods costing $31,920.00. Adjust the records to the count.
Assumptions: Perpetual inventory: each sale also records its cost of goods sold. The count is correct and the records contain no posting errors. The company records inventory count differences in Cost of Goods Sold.
Accounts to choose from: Sales Revenue · Accounts Payable · Accounts Receivable · Inventory · Cost of Goods Sold · Cash
Account Debit Credit Donating goods to a charity
A clothing store donates 40 new winter coats from its merchandise to a charity that runs a homeless shelter. Each coat cost $25.00.
Assumptions: Perpetual inventory: each sale also records its cost of goods sold. The coats’ fair value equals their cost. Income taxes are ignored.
Accounts to choose from: Sales Revenue · Inventory · Charitable Contributions Expense · Cash · Cost of Goods Sold · Advertising Expense
Account Debit Credit
Not in this convention: Transferring unsold purchases to inventory at year end
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