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Jul 31 Interest receiable 67 Interest revenue ( 10 x 8% x 1/12) 67 OCT 1 CASH 10200 Notes receiable 10000 Interest revenue (notes honored) (10000x8%x3/12) 200 Oct 1 Bad debt expense 10.

Operating expenses The cost of the merchandise returned was $600.

Oct 25 Sales return and Less: sales discount 20. 25 Issued a credit memo to TL for $1,000 for merchandise returned by him from the sale on October 20. The cost of the merchandise sold was $9,500. The company takes all discounts to which it is entitled 20 Sold merchandise for $16,000 to TL on account. 15 Paid for merchandise purchased on October 8. 10 Paid freight bill of $200 for merchandise purchased on October 8. 8 Purchased merchandise for $12,000 on account. 5 Paid $15,000 cash for operating expenses that were incurred and properly recorded in the previous period. Part 2 For each situation given below prepare journal entries on the October for BC Company B us perpetual inventory system. They are paid each Friday for a five-day workweek that begins cach Monday, June 30 is a Thursday in 2016. TL&MA Company has two office employees who earn $80 and 590 per day, respectively. It is estimated that the annual depreciation will be $8,400. On March 31, 2018, CLH Company purchased a delivery van for $42,000. A physical count of office supplies at June 30 revealed that there was $ still on hand. During June, office supplies costing 5600 were purchased. On June 1, 2018, the balance in the Office Supplies account was $100.

The amount received was credited to the Unearned Rent account. On January 1, 2018, a tenant in an apartment building owned by CLH Company paid 55,400, which represents six months' rent in advance. Lance Company purchased a 3-year insurance policy on March 1, 2018, and debited Prepaid Insurance for $7. Aporopriate adjusting entries had been recorded in previous months. You are to prepare the necessary adjusting journal entries for CLH Company for the month of January for each situation given. Period costs are reported as expenses on the income statement in the period in which they are incurred and, thus, never appear on the balance sheet.Part 1: The following information for CLH Company is available on June 30, 2018, the end of a monthly accounting period. When the inventory is sold, the cost of the manufactured product sold is reported as cost of goods sold on the income statement. As product costs are incurred, they are recorded and reported on the balance sheet as inventory. The impact on the financial statements of product and period costs. It is also useful for determining the minimum price at which a product can be sold while still generating a profit. This additional information is needed when calculating the break even sales level of a business. Product costs are sometimes broken out into the variable and fixed subcategories. Selling costs can vary somewhat with product sales levels, especially if sales commissions are a large part of this expenditure. Administrative activities are the most pure form of period costs, since they must be incurred on an ongoing basis, irrespective of the sales level of a business. Period costs are sometimes broken out into additional subcategories for selling activities and administrative activities. Examples of period costs are general and administrative expenses, such as rent, office depreciation, office supplies, and utilities. This accounting is used to match the revenue from a product sale with the associated cost of goods sold, so that the entire effect of a sale transaction appears within one income statement.Įxamples of product costs are direct materials, direct labor, and allocated factory overhead.

Once the related goods are sold, these capitalized costs are charged to expense. Product costs are initially recorded within the inventory asset. Thus, a business that has no production or inventory purchasing activities will incur no product costs, but will still incur period costs. The key difference between product costs and period costs is that product costs are only incurred if products are acquired or produced, and period costs are associated with the passage of time. Administrative expenses are incurred in managing the company and are not directly related to the manufacturing or selling functions. Selling expenses are incurred in marketing the product and delivering the product to customers. Period costs consist of selling and administrative expenses. Product costs consist of manufacturing costs: direct materials, direct labor, and factory overhead.Ģ. For financial reporting purposes, costs are classified as product costs or period costs.ġ.