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Inventory Question 2

QUESTION 2 – Inventory (CAF1 A17)

Max Savings sells goods at cost plus 30% and uses perpetual inventory method to record the
inventory. The following transactions pertain to August 2017:

04-Aug Purchased goods on cash for Rs. 568,000.


07-Aug Sold goods on credit for Rs. 2,418,000.
10-Aug Returned goods to a supplier costing Rs. 87,000.
13-Aug Purchased goods on credit for Rs. 2,360,000.
13-Aug Paid carriage inward of Rs. 48,000.
20-Aug A customer returned goods which had been invoiced at Rs. 58,500.
24-Aug Cash sales of Rs. 120,000 net of a special discount of Rs. 10,000.
31-Aug Physical inventory count revealed that goods having list price of Rs. 26,000 have
expired and had to be scrapped.

Required:
Prepare journal entries to record the above transactions. (Narrations are not required) (10)

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Inventory Question 2

ANSWER 2 – Inventory (CAF1 A17)

Part (b)
Closing entries
Date Particulars Dr. Rs. Cr. Rs.
04 Aug 2017 Inventory 568,000
Cash 568,000
(To record cash purchases)
07 Aug 2017 Receivables 2,418,000
Sales 2,418,000
Cost of sales (2,418,000 x 100 / 130) 1,860,000
Inventory 1,860,000
(To record sales and cost of sales
10 Aug 2017 Payables 87,000
Inventory 87,000
(To record goods returned to suppliers)
13 Aug 2017 Inventory 2,360,000
Payables 2,360,000
(To record purchase of inventory on credit)
13 Aug 2017 Inventory 48,000
Cash / Bank 48,000
(To record carriage inwards)
20 Aug 2017 Sales return 58,500
Receivable / Cash 58,500
Inventory (58,500 x 100 /130) 45,000
Cost of Sales 45,000
(To record sales returns)
24 Aug 2017 Cash 120,000
Sales 120,000
Cost of sales (120,000+10,000= 130,000 x 100 / 130) 100,000
Inventory 100,000
(To record sales and cost of sales)
31 Aug 2017 Cost of Sales (26,000 x 100 /130) 20,000
Inventory 20,000
(To record inventory losses)

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