Prepare journal entries to record the following merchandising transactions of Lo
ID: 2601688 • 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.) Aug. 1 Purchased merchandise from Aron Company for $5,000 under credit terms ot 1/10, n/30, FOB destination, invoice dated August 1 5 Sold nerchandise to Baird Corp. for $3,500 under credit terns of 2/10, n/60, FOB destination, invoice dated August 3. The merchandise had cost $2,000 8 Purchased merchandise from Waters Corporation for $4,000 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8. 9 Paid $130 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 vas 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 $400 off the $4,000 of goods purchased. 14 At Aron's request, Lowe's paid s120 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 allovance from August 12. 19 Sold merchandise to Tux Co. for $3,000 under credit terms of n/10, FOB shipping point, invoice dated August 19. The merchandise had cost $1,500. 22 Tux requ ested a price reduction on the August 19 sale because the merchandise did not meet specifications. Love's sent Tux a $500 credit memorandum toward the $3,000 invoice to resolve the issue 29 Received Tux's cash payment for the amount due from the August 19 sale less the price allovance from August 22 30 Paid Aron Company the amount due from the August 1 purchaseExplanation / Answer
Journal Entries (Amount in $)
Date General Journal Debit Credit Aug 1 Merchandise Inventory 5,000 Accounts payable-Aron 5,000 (To record the purchase of inventory on credit) Aug 5 Accounts Receivable-Baird Corp. 3,500 Sales 3,500 (To record the sale of inventory) Aug 5 Cost of goods sold 2,000 Merchandise Inventory 2,000 (To record the cost of inventory sold) Aug 8 Merchandise Inventory 4,000 Accounts Payable-Waters corporation 4,000 (To record the purchase of inventory on credit) Aug 9 Shipping charges 130 Cash 130 (Cash paid for shipping charges of sale to Baird corp.) Aug 10 Sales 1,000 Accounts Receivable-Baird Corp. 1,000 (To record the sales returns from Baird corp.) Aug 10 Merchandise inventory 500 Cost of goods sold 500 (To record the cost of inventory return) Aug 12 Accounts Payable-Waters corporation 400 Discount received 400 (To record the price allowance from Waters corporation) Aug 14 Accounts payable-Aron 120 Cash 120 (To record the freight charges paid on the behalf of Aron) Aug 15 Cash 2,450 Discount Allowed (2,500*2%) 50 Accounts Receivable-Baird Corp. (3,500-1,000) 2,500 (To record the cash received from Baird Corp. and discount allowed within payment terms) Aug 18 Accounts Payable-Waters corporation 3,600 Cash 3,600 (To record the amount paid to waters corp) Aug 19 Accounts Receivable-Tux Co. 3,000 Sales 3,000 (To record the sales) Aug 19 Cost of goods sold 1,500 Merchandise Inventory 1,500 (To record the cost of inventory sold) Aug 22 Discount Allowed 500 Accounts Receivable-Tux Co. 500 (To record the discount allowed) Aug 29 Cash 2,500 Accounts Receivable-Tux Co. 2,500 (To record the cash received from Tux co.) Aug 30 Accounts Payable-Aron (5,000-120) 4,880 Cash 4,880 (To record the balance cash paid to Aron)