Prepare journal entries to record the following transactions for a retail store.
ID: 2340088 • Letter: P
Question
Prepare journal entries to record the following transactions for a retail store. The company uses a perpetual inventory system and the gross method. Apr. 2 Purchased $4,200 of merchandise from Lyon Company with credit terms of 2/15, n/60, invoice dated April 2, and FOB shipping point. 3 Paid $240 cash for shipping charges on the April 2 purchase 4 Returned to Lyon Company unacceptable merchandise that had an invoice price of $450 17 Sent a check to Lyon Company for the April 2 purchase, net of the discount and the returned merchandise. 18 Purchased $7,700 of merchandise from Frist Corp. with credit terms of 1/10, n/30, invoice dated April 18, and FOB destination. 21 After negotiations, received from Frist a $500 allowance toward the $7,700 owed on the April 18 purchase. 28 Sent check to Frist paying for the April 18 purchase, net of the allowance and the discount.Explanation / Answer
Solution:
Journal entries for a retail store:
Working notes:
April 17: Cash paid within discount period less returns :
($4,200 - $450) * (100% - 2%)
= $3750 * 0.98
= $3,675
April 28: Cash paid balance within discount period :
($7,700 - $500) * (100% - 1%)
= $7,200 * 0.99
= $7,128
Date Particulars Amount ($) Amount ($) April 02 Merchandise inventory Dr $4,200 To Accounts payable - Lyon $4,200 April 03 Merchandise inventory Dr $240 To Cash $240 April 04 Accounts payable - Lyon Dr $450 To Merchandise inventory $450 April 17 Accounts payable - Lyon Dr ($4,200 - $450) $3,750 To Merchandise inventory $75 To Cash $3,675 April 18 Merchandise inventory Dr $7,700 To Accounts payable First corporation $7,700 April 21 Accounts payable First corporation Dr $500 To Merchandise inventory $500 April 28 Accounts payable First corporation Dr ($7,700 - 500) $7,200 To Merchandise inventory $72 To Cash $7,128