Homework SourseThe Track Shack a recording studio in Jackson Mississippi re
The Track Shack, a recording studio in Jackson, Mississippi recently ordered $8,750 worth of digital storage media to keep in their warehouse. These media devices (thumb drives, CD\'s, etc.) will be given to clients/recording artists to hold demo songs, etc. after post production services have been applied to their talents. When delivered the shipment included the printed invoice from MS&C Inc. noting the terms 3/10,n/30.
What would the journal entry look like record the inventory purchase when ordered/delivered if the Track Shack uses the perpetual inventory method?
Item # 2 is the correct journal entry
Item # 4 is the correct journal entry
Item # 3 is the correct journal entry
Item # 1 is the correct journal entry
| Item | Accounts/Descriptions | Post Ref | DEBIT | CREDIT |
| 1 | Merchandise Inventory | $8,487.50 | ||
| Accounts Payable | $8,487.50 | |||
| 2 | Merchandise Inventory | $8,750.00 | ||
| Accounts Payable | $8,750.00 | |||
| 3 | Accounts Payable | $8,750.00 | ||
| Merchandise Inventory | $262.50 | |||
| Cash | $8,487.50 | |||
| 4 | Accounts Payable | $8,487.50 | ||
| Cash | $8,487.50 |
Solution
Under perpetual inventory method , the purchase of inventory is recorded by debiting inventories and crediting accounts payable assuming that the inventories are bought on credit. Hence, option A is correct in which item number 2 is the correct journal entry i.e.
Merchandise inventory dr $8750
To accounts payable $8750
