Periodic Inventory System

Under periodic inventory system, inventory balance is updated at the end of each period.

(1) Entity H purchased 1,000 units of merchandise at $6 per unit in cash.

Purchases

6,000

   Cash

6,000

(2) Entity H sold 400 units of merchandise at $10 per unit in cash.

Cash

4,000

   Sales revenue

4,000

(3) At the end of the period, Entity H took a physical inventory and counted 600 units in the warehouse as inventory.

Merchandise inventory

3,600 (*)

Cost of goods sold

2,400

   Purchases

6,000

        

        [Note]

        (*) 600 units x $6 per unit = $3,600

        Cost of goods sold = Beginning inventory + Purchases - Ending inventory
= 0 + 6,000 - 3,600 = 2,400