What are the inventory transactions that CD City recorded in July?
Recording Inventory Transactions for CD City in July
CD City uses a perpetual inventory system, where every purchase, sale, and return is recorded in real-time. This allows the company to have an accurate balance of inventory and determine its cost of goods sold and ending inventory. Let's go through the inventory transactions that CD City recorded in July:
1. July 3: CD City purchased CDs on account from Wholesale Music for $2,250. The cost of these CDs was added to the inventory balance.
2. July 4: CD City paid $100 in cash for freight charges related to the July 3 purchase from Wholesale Music. This transaction did not affect the inventory.
3. July 9: CD City returned incorrectly ordered CDs to Wholesale Music and received a credit of $200. This reduced the inventory balance.
4. July 11: CD City paid Wholesale Music in full, settling the remaining balance from the July 3 purchase.
5. July 12: CD City sold CDs on account to customers for $5,700. The cost of these CDs was deducted from the inventory balance.
6. July 15: CD City received full payment from customers for the July 12 sale. This transaction did not affect the inventory.
7. July 18: CD City purchased CDs on account from Music Supply for $3,050. The cost of these CDs was added to the inventory balance.
8. July 22: CD City sold CDs for cash to customers for $4,150. The cost of these CDs was deducted from the inventory balance.
9. July 28: CD City returned CDs to Music Supply and received a credit of $290. This reduced the inventory balance.
10. July 30: CD City paid Music Supply in full, settling the remaining balance from the July 18 purchase.
By recording these transactions, CD City can keep track of its inventory and accurately determine its cost of goods sold and ending inventory. This information is crucial for financial reporting and decision-making.