CASE (100 points)

Plug-In sells IT Hardware and Infrastructure. At December 31, 2018, the companys inventory amounted to $400,000. During the year 2019, the company made only one purchase and two sales. These transactions were as follows:

January 17. Purchased merchandises from Silicon Makers. The price of the merchandises was 600.000, discount terms 2/10; n/30

January 27. Paid the accounts payable to Silicon Makers.

March 25. Sold merchandises to Federal Pack for $997.000 who paid cash. The cost of these items was $.877.360

December 18. Sold hard ware to the local administration for $187.000. The cost of said equipment was $158.950, with discount terms 3/10; n/50. Said invoice was still unpaid at December 31, 2019

Instructions

1. Prepare journal entries to record these transactions, assuming that Plug-In uses a perpetual inventory system. Provide with a developed explanation of the different entries and a justification of the amounts recorded. (10 points for the entries, 10 points for the explanations)
2. Compute the ending balance in the Inventory account at the close of business on January 6 Explain your answer. (5 points for the entries, 5 points for the explanations)
3. Prepare the companys income statement for the year 2019 taking into account that the remaining expenses of the company during the whole year amounted to 98.000 including depreciation (10 points). Explain the different entries of the income statement and in particular the effects of the discount terms on the operations where applicable (20 points).
4. Explain the main differences between the perpetual and periodic inventory system and record the transactions using a periodic inventory system (10 points for the entries, 10 points for the explanations)
5. Prepare the companys trial balance at January 1, 2020 taking into account a Balance sheet at January 1 2019 as follow. Dont forget to adjust Accumulated Depreciation (20 points):

Plug-In
Balance sheet
January 1, 2019
Cash	278.000
Inventory	400.000
Equipment (useful life 5 years)	55.000
Accumulated depreciation Equipment	-44.000
Land	123.000
Building (useful life 20 years)	200.000
Accumulated depreciation Building	-120.000
Capital		250.000
Retained earnings		642.000
Total	892.000	892.000

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