Prepare journal entries to record the following merchandising transactions of Lo
ID: 2590805 • Letter: P
Question
Prepare journal entries to record the following merchandising transactions of Lowe’s, which uses the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on August 1 in Accounts Payable—Aron.) Please show any math you use.
Aug. 1 Purchased merchandise from Aron Company for $4,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1. 5 Sold merchandise to Baird Corp. for $2,800 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise had cost $2,000. 8 Purchased merchandise from Waters Corporation for $3,000 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8. 9 Paid $180 cash for shipping charges related to the August 5 sale to Baird Corp. 10 Baird returned merchandise from the August 5 sale that had cost Lowe’s $500 and was sold for $1,000. The merchandise was restored to inventory. 12 After negotiations with Waters Corporation concerning problems with the purchases on August 8, Lowe’s received a credit memorandum from Waters granting a price reduction of $300 off the $3,000 of goods purchased. 14 At Aron’s request, Lowe’s paid $240 cash for freight charges on the August 1 purchase, reducing the amount owed to Aron. 15 Received balance due from Baird Corp. for the August 5 sale less the return on August 10. 18 Paid the amount due Waters Corporation for the August 8 purchase less the price allowance from August 12. 19 Sold merchandise to Tux Co. for $2,400 under credit terms of n/10, FOB shipping point, invoice dated August 19. The merchandise had cost $1,200. 22 Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Lowe’s sent Tux a $400 credit memorandum toward the $2,400 invoice to resolve the issue. 29 Received Tux’s cash payment for the amount due from the August 19 sale less the price allowance from August 22. 30 Paid Aron Company the amount due from the August 1 purchase.
Explanation / Answer
Sl No
General Journal
Debit
Credit
1
Inventory
4000
Accounts Payable
4000
5
Accounts Receivable – Baird Corp.
2800
Sales
2000
8
Inventory –Water corp.
3000
Accounts Payable
3000
9
Delivery Expense
180
Cash
180
10
Sales Returns and Allowances
1000
Inventory
1000
Accounts Receivable - Baird
500
Cost of Goods Sold
500
12
Accounts Payable
300
Inventory
300
14
Accounts Payable
240
Cash
240
15
Cash
2254
Sales Discount 46 (2300 x 2%)
46
Accounts Receivable(2800 - 500)
2300
18
Accounts Payable(3000 -300)
2700
Credit Inventory {(3000-300)x1%}
27
Cash
2673
19
Accounts Receivable - Tux
2400
Cost of Goods Sold
1200
Sales
2400
Inventory
1200
22
Returns and Allowances
400
Accounts Receivable
400
29
Cash
1980
Sales Discount {(2400 – 400)x1%}
20
Accounts Receivable- Tux 2000(2400 - 400)
2000
30
Accounts Payable - Aron
4000
Cash
4000
Sl No
General Journal
Debit
Credit
1
Inventory
4000
Accounts Payable
4000
5
Accounts Receivable – Baird Corp.
2800
Sales
2000
8
Inventory –Water corp.
3000
Accounts Payable
3000
9
Delivery Expense
180
Cash
180
10
Sales Returns and Allowances
1000
Inventory
1000
Accounts Receivable - Baird
500
Cost of Goods Sold
500
12
Accounts Payable
300
Inventory
300
14
Accounts Payable
240
Cash
240
15
Cash
2254
Sales Discount 46 (2300 x 2%)
46
Accounts Receivable(2800 - 500)
2300
18
Accounts Payable(3000 -300)
2700
Credit Inventory {(3000-300)x1%}
27
Cash
2673
19
Accounts Receivable - Tux
2400
Cost of Goods Sold
1200
Sales
2400
Inventory
1200
22
Returns and Allowances
400
Accounts Receivable
400
29
Cash
1980
Sales Discount {(2400 – 400)x1%}
20
Accounts Receivable- Tux 2000(2400 - 400)
2000
30
Accounts Payable - Aron
4000
Cash
4000