1.	Purchase of inventory: 
-	On May 4, Sauk stereo purchased inventory of $3,800 form PW Audio supply company on account. This inventory cost PW Audio supply $2,400.
2.	Fright cost: تكليف النقل 
A.	On May 6, the responsible company paid freight cost of $150. The fright terms were FOB Shipping point.
   Or
B.	On May 6, the responsible company paid fright cost of $150. The fright terms were FOB destination
3.	Purchase return and allowances:
A.	On May 8, Sauk stereo returned goods that was purchased by $300 to PW audio Supply. The cost of this returned inventory for PW Audio supply is $140. (assume no defect).
4.	Purchase discountز
A.	On May 14, Sauk paid the amount on account. The purchase term was 2/10, n/30.
Or
B.	On May 16, Sauk paid the amount on account. The purchase term was 2/10, n/30.
Required: 
A.	Journalise the previous transactions using perpetual and periodic inventory systems for both the buyer and the seller.

Seller determines the discount terms 
Discount:  2/10 net 30 
discount 2% if paid during 10 days of the purchase date . 

1/10 net 30 
1% discount if paid during 10 days
خصم 1% اذا رفعت خلال 10 ايام من تاريخ الشراء

1/10 EOM 
1% if paid during 10 days of the end of the month 
خصم 1% اذا دفعت خلال 10 ايام من نهاية الشهر  

Buyer ( Sauk stereo)	Explanation	
	Perpetual	Periodic		
Purchase of inventory on account 	Dr inventory    3,800    
  Cr acc pay         3,800 	Dr purchases     3,800 
  Cr acc pay          3,800 	Purchases : المشتريات 
Income statement (Included in COGS)
Normal balance Dr 
increase Dr      Decrease Cr

Fright cost : (A.) 	Dr inventory   150 
  Cr cash           150 	Dr Fright in       150 
  Cr cash             150 	Fright in : تكاليف نقل داخلة
Income statement )Included in COGS)
Normal balance Dr 
increase Dr      Decrease Cr
	
         (B) 	No entry 	No entry 		
Purchase return       مرتجعات المشتريات (A) 	Dr acc pay       300 
   Cr inventory       300	Dr acc pay          300
  Cr purchase return and allowance    300 	Purchase R & A :
مرتجعات و مسموحات المشتريات  
Income statement )included in COGS(
Normal balance Cr 
Increase Cr 
Decrease Dr 

Contra purchase account عكس المشتريات	
Purchase discount (A) 	Dr acc pay       3,500 
  cr inventory            70
  Cr Cash              3,430                   
   (3,500-2%*3,500)	Dr acc pay       3,500 
  cr purchase discount      70
  Cr Cash              3,430                   	Purchase discount : خصم مشتريات 
Income statement )Included in COGS)
Normal balance Cr 
Increase Cr , decrease Dr
 
Contra purchase account  عكس المشتريات 	
(B) 	Dr acc pay       3,500 
  Cr cash              3,500	Dr acc pay       3,500 
  Cr cash              3,500		

Acc pay	
Dr	Cr	
300	3,800	
	End bal           3,500 	

Seller  (PW audio supply)		
	Perpetual 	Periodic		
Sale of inventory on account 	Dr acc rec        3,800      S.P
  Cr sales rev          3,800 
Dr COGS         2,400      cost
  Cr inventory           2,400	Dr acc rec        3,800 
  Cr sale rev          3,800	COGS : Income statement 
Normal bal   Dr 
Increase Dr  Decrease Cr 	
Fright cost : A. 	No entry 	No entry 		
B.	Dr Fright out        150 
   Cr cash             150 	Dr Fright out        150 
   Cr cash             150	Fright out: Income statement 
Normal bal   Dr 
Increase Dr  Decrease Cr

Fright out : تكاليف نقل خارجية
Operating expense مصاريف تشغيلية 	
Sales return مرتجعات مبيعات 

(A) 	Dr sales return and allowance   300
   Cr acc rec                 300

Dr inventory       140     cost
  Cr COGS              140	Dr sales return and allowance   300
   Cr acc rec                 300	Sales R&A: 
مرتجعات و مسموحات المبيعات

Income statement 
Normal balance Dr 
Increase Dr 
Decrease Cr 

contra sales rev account عكس المبيعات 	
Sales discount (A) خصم مبيعات 

	Dr cash(3,500-2%*3,500)   3,430
Dr sales discount            70 
  Cr acc rec                 3,500 	Dr cash(3,500-2%*3,500)   3,430
Dr sales discount            70 
  Cr acc rec                 3,500	Sales discount:   حصم المبيعات 

Income statement 
contra sales account      عكس المبيعات 
Increase Dr , decrease Cr 	
(B) 	Dr cash       3,500 
   Cr acc rec          3,500	Dr cash           3,500 
  Cr acc rec             3,500 		

Acc rec	
Dr	Cr	
3,800 	300	
End bal               3,500 		

Service companies 

service rev 
- expense 
= Net income 

merchandising companies 

Perpetual	
X.co 
Income statement 
for the month …. 	
Net sales صافي المبيعات		
   Sales revenue 
   Less: sales discount 
       Sales R & A	 3,000,000
(500,000)
(200,000)                      2,300,000	
COGS تكلفة البضاعة المباعة	(300,000)	
Gross profit الربح الاجمالي	2,000,000	
Operating expense مصاريف تشغيلية
   Salaries 
   electricity 
   Dep 
   Fright out 	(500,000)	
Operating income  الربح التشغيلي 	1,500,000 	

Periodic 	
X.co 
Income statement 
for the month …. 	
Net sales صافي المبيعات		
   Sales revenue 
   Less: sales discount 
       Sales R & A	 3,000,000
(500,000)
(200,000)                    2,300,000	
COGS تكلفة البضاعة المباعة		
    Beg inventory بضاعة اول المدة	                             195,000 	
   + Cost of good purchased تكلفة البضاعة المشتراة		
         Net Purchases 		
          Purchases 	150,000	
          Less: Purchase discount 	(10,000)	
              Purchase R &A	(5,000)              135,000	
      + Fright in 	                    20,000    155,000	
    = COGAS	350,000	
-	End Inventory جرد	50,000	
COGS	(300,000)	
Gross profit الربح الاجمالي	2,000,000	
Operating expense مصاريف تشغيلية
   Salaries 
   electricity 
   Dep 
   Fright out 	(500,000)	
Operating income  الربح التشغيلي 	1,500,000 	

COGS = Cost of goods available for sale – end. Inv 
COGS = (Beg inv + COGP) – Ending inventory 
COGP = Net purchases + fright in 
Net purchases = purchases – purchase discount – purchase R & A

Net sales = sales rev – sales discount – sales R&A 
Net sales – COGS = Gross profit 
Gross profit – operating exp = operating income 

E3-19 ) 
Net purchases = purchases – purchase discount – purchases R &A 
(A)         = 1,620     -  zero  - 40
           = 1,580 

COGP = Net purchases + Fright in  = purchases – purchase discount – purchases R &A + Fright in 
     = 1,580 + 95 
B    = 1,675 

COGS = GOGAS – ending = Beg inv + COGP – end inv 
     = 1,840 – 310    = 165 + 1,675 - 310
C    = 1,530 

Net purchases = purchases – purchase discount – purchases R &A
1,030       = 1,060 – zero - (D) 
1,030 – 1,060 = -D 
-30 = -D 
30 = D 

COGP = Net purchases + fright in 
1,280 = 1,030 + E 
1,280 – 1,030 = E  = 250