Litton Industries uses a perpetual inventory system. The company began its fiscal year with inventory of $267,000. Purchases of merchandise on account during the year totaled $845,000. Merchandise costing $902,000 was sold on account for $1,420,000. Prepare the journal entries to record these transactions.

Answer and Explanation:

The journal entries are shown below:

1. Inventory Dr $845,000

       To Account payable $845,000

(Being inventory purchase on the account)

2. Account receivable Dr $1,420,000

         To Sales revenue $1,420,000

(Being sale on the account is recorded)

3. Cost of goods sold Dr $902,000

        To Inventory $902,000

(Being cost of sales is recorded)

These journal entries are to be recorded

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