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Prepare the journal entries to record the January inventory

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Reference no: EM132882721

Problem - Perpetual versus Periodic Inventory Systems - Howard, Inc. is a merchandising company that began operations on January 1, 2019. During January, the following inventory transactions occurred:

Jan. 11 Howard purchased merchandise on account for $12,000.

Jan. 15 Howard returned some of the merchandise purchased on Jan. 11, and the supplier credited Howard's account. The cost of the merchandise returned was $700.

Jan. 20 Howard sold merchandise that cost $3,500 for $5,000 in cash

Required -

1. Assume that Howard uses a perpetual inventory system. Prepare the journal entries to record the January inventory transactions.

2. Assume that Howard uses a periodic inventory system. Prepare the journal entries to record the January inventory transactions. Be sure to include any adjusting entries necessary.

3. Howard's CEO states that a perpetual inventory system would result in a better inventory valuation. Evaluate this statement and provide a discussion of the benefits of each type of inventory system.

Reference no: EM132882721

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