Prepare journal entries to record the following transactions for a retail store.

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 $6,100 of merchandise from Lyon Company with credit terms of 2/15, n/60, invoice dated April 2, and FOB shipping point. Apr. 3 Paid $280 cash for shipping charges on the April 2 purchase. Apr. 4 Returned to Lyon Company unacceptable merchandise that had an invoice price of $650. Apr. 17 Sent a check to Lyon Company for the April 2 purchase, net of the discount and the returned merchandise. Apr. 18 Purchased $11,500 of merchandise from Frist Corp. with credit terms of 1/10, n/30, invoice dated April 18, and FOB destination. Apr. 21 After negotiations, received from Frist a $600 allowance toward the $11,500 owed on the April 18 purchase. Apr. 28 Sent check to Frist paying for the April 18 purchase, net of the allowance and the discount.

Explanation / Answer

Date

General Journal

Debit

Credit

April 02

Merchandise inventory

6100

Accounts payable-Lyon

6100

April 03

Merchandise inventory

280

Cash

280

April 04

Accounts payable-Lyon

650

Merchandise inventory

650

April 17

Accounts payable-Lyon

5450

Merchandise inventory

109

Cash

5341

April 18

Merchandise inventory

11500

Accounts payable-First Corp.

11500

April 21

Accounts payable-First Corp.

600

Merchandise inventory

600

April 28

Accounts payable-First Corp.

10900

Merchandise inventory

109

Cash

10791

Explanation:

Apr. 17: Cash paid within discount period less returns = [($6100 $650) × (100% 2%)] = $5341
Apr. 28: Cash paid balance within discount period = [($11500 $600) × (100% 1%)] = $10791

Date

General Journal

Debit

Credit

April 02

Merchandise inventory

6100

Accounts payable-Lyon

6100

April 03

Merchandise inventory

280

Cash

280

April 04

Accounts payable-Lyon

650

Merchandise inventory

650

April 17

Accounts payable-Lyon

5450

Merchandise inventory

109

Cash

5341

April 18

Merchandise inventory

11500

Accounts payable-First Corp.

11500

April 21

Accounts payable-First Corp.

600

Merchandise inventory

600

April 28

Accounts payable-First Corp.

10900

Merchandise inventory

109

Cash

10791

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