Instead of using the perpetual method, use the periodic method to report your inventory purchases, purchase returns and Freight in.

You purchased Inventory for $135,500 on August 31st. You paid on account. The terms are 1.5/10; N/30

Asset

=

Liab. +

Stockholder's Equity

You paid $2500 of shipping costs to receive this inventory. You also paid sales tax of $8130

Com. Stk

Ret. Earn.

Account

Increase

Decrease

Your returned some of the inventory for $15,230 on Sept. 5th because it was the incorrect order.

Asset

=

Liab. +

Stockholder's Equity

Account

Increase

Decrease

Com. Stk

Ret. Earn.

On Sept. 5th you paid your vendor the remaining balance on the account.

Asset

=

Liab. +

Stockholder's Equity

Account

Increase

Decrease

Com. Stk

Ret. Earn.

On Sept. 20th, you sold $76,340 of the inventory for $132,500 to a client on account

Asset

=

Liab. +

Stockholder's Equity

You paid shipping costs of $400 in cash to ship this to the client

Com. Stk

Ret. Earn.

You gave the client 2/10; N/30. Use the Gross Method of reporting

Account

Increase

Decrease

Client returns $25,000 of the inventory back to you. The cost of this inventory was $14,404.

Asset

=

Liab. +

Stockholder's Equity

Account

Increase

Decrease

Com. Stk

Ret. Earn.