Closing Entries: The journal entries recorded in the accounts books to close out the temporary accounts during the closing process are called closing entries. Rules of Journal Entry : To increase the balance of account one needs to debit assets, expenses, losses and credit all the liabilities, revenues and gains including capital. To decrease the balance of account credit all assets, expenses, losses and debit all liabilities, revenues and gains including capital. Perpetual Inventory System: It is an inventory system wherein the accounts related to inventory are updated on each purchase and sale activity. Quantities of inventory are updated on continuous basis. This can be done by integrating the inventory system to order entry and to the retail sale point of system. 1. To prepare: Closing entries in the books of Company C.

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Chapter 4, Problem 4PSA

To determine

Closing Entries:

The journal entries recorded in the accounts books to close out the temporary accounts during the closing process are called closing entries.

Rules of Journal Entry:

To increase the balance of account one needs to debit assets, expenses, losses and credit all the liabilities, revenues and gains including capital.

To decrease the balance of account credit all assets, expenses, losses and debit all liabilities, revenues and gains including capital.

Perpetual Inventory System:

It is an inventory system wherein the accounts related to inventory are updated on each purchase and sale activity. Quantities of inventory are updated on continuous basis. This can be done by integrating the inventory system to order entry and to the retail sale point of system.

1.

To prepare: Closing entries in the books of Company C.

2.

To determine

To compute: Ratio of sales returns by gross sales.

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Instructions: Using both periodic and perpetual inventory system, you are required to prepare the following: 1. Chart of Accounts 2. Comparative Journal Entries

Tatum Company has four products in its inventory. Information about the December 31, 2021, inventory is as follows: Total Net Product Total Cost Realizable Value $156,000 108,000 78,000 48,000 $118,000 128,000 68, 000 68, 000 101 102 103 104 Required: 1. Determine the carrying value of inventory at December 31, 2021, assuming the lower of cost or net realizable value (LCNRV) rule is applied to individual products. 2. Assuming that inventory write-downs are common for Tatum Company, record any necessary year-end adjusting entry. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the carrying value of inventory at December 31, 2021, assuming the lower of cost or net realizable value (LCNRV) rule is applied to individual products. Inventory Value Product Cost NRV 101 $ 156,000 $ 118,000 102 108,000 128,000 103 78,000 68,000 104 48,000 68,000 $ 390,000

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