Question

Jasmine Corporation purchased inventory costing $125,000 and sold 75% of the goods for $163,750. All purchases and sales were on account. Jasmine later collected 25% of the accounts receivable. Assume that sales returns are nonexistent.
1. Journalize these transactions for Jasmine, which uses the perpetual inventory system.
2. For these transactions, show what Jasmine will report for inventory, revenues, and expenses on its financial statement at the end of the month. Report gross profit on the appropriate statement. Assume beginning inventory is $0.

Answer 1

Answer:

Part 1

Purchase journal

Debit  : Merchandise Inventory $125,000

Credit : Accounts Payable $125,000

Sales journal

Debit  : Accounts Receivable $163,750

Debit  : Cost of Sales ($125,000 x 75%) $93,750

Credit : Sales Revenue $163,750

Credit : Inventory $93,750

Collection of Payments journal

Debit : Cash ($163,750 x 25%) $40,938

Credit : Accounts Receivable $40,938

Part 2

Inventory = $31,250

revenues = $163,750

expenses = $93,750

gross profit = $70,000

Explanation:

inventory = Purchases - Cost of sales

                = $125,000 - $93,750

                = $31,250

revenues = Sales to Customers paid up or not

                = $163,750

expenses = Cost of sales

                = $93,750

gross profit = Sales - Cost of sales

                   = $163,750 - $93,750

                   = $70,000