Perpetual inventory system: journal entries. At the starting of 20X3, Beehler Company implemented a computerized perpetual inventory system. The first transactions which occurred during 20X3 follow:
- 1/2/20X3 Purchases on account: 500 units @ $6 = $3,000
- 1/15/20X3 Sales on account: 300 units @ $8.50 = $2,550
- 1/20/20X3 Purchases on Account: 200 units @ 5 = $1,000
• 1/25/20X3 Sales on Account: 300 units @ $8.50 = $2,550
The company president examined the computer-generated journal entries for these transactions and was confused by the absence of the Purchases account.
a) Duplicate the journal entries which would have appeared on the computer printout beneath FIFO and LIFO.
b) Compute the balance in the firm's Inventory account beneath each method.
c) In brief, describe the absence of the Purchases account to the company president.