Reference no: EM132986840

Crane Traders is a wholesaler of fishing rods operating at Forster on the NSW north coast. The company buys fishing rods for $250 each and sells them for $310 each. On the 1st August the company had 190 fishing rods in its store.

During August 2021 the following transactions took place:

August 3rd Purchased 100 fishing rods from Reels Express, terms 5/10, n/30
August 4th Paid $140 freight on the fishing rods purchased from Reels express on August 3rd.
August 11th Sold 150 fishing rods on account, terms 5/10, n/30
August 14th Sold 80 fishing rods for cash.
August 16th Returned 15 fishing rods purchased last month to Reels Express as they were damaged.
August 18th A customer returned 20 of the fishing rods sold on August 11th and paid for the remaining fishing rods sold.
August 24th Paid for the fishing rods purchased on August 3rd.
At the end of August, a physical count of inventory revealed that the business had 65 fishing rods in its store.

Required:

Problem a) Prepare the journal entries to record each of the above transactions in the accounting records of Crane Traders assuming that the periodic inventory system is used

Problem b) Discuss the importance of performing a stocktake at the end of the accounting period for the periodic inventory system