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 $7,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1. 5 Sold merchandise to Baird Corp. for $4,900 under credit terms of 2/10, 1/60, POB destination, invoice dated August 5. The merchandise had cost $3,000. # Purchased merchandise from Waters Corporation for $6,000 under credit terms of 1/10, n/45, POB shipping point, invoice dated August 8. 9 Paid $110 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 Love'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, Love's received a credit memorandum from Waters granting a price reduction of $600 off the $6,000 of goods purchased. 14 At Aron's request, Love's paid $490 cash for freight charges on the August I 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 $4,200 under credit terms of n/10, POB shipping point, Invoice dated August 19. The merchandise had coat 52,100. 22 Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Lowe'sont Tux a $700 credit memorandum toward the $4,200 invoice to resolve the issue. 29 Received Tux 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 I purchase. View transaction list Journal entry worksheet Purchased merchandise from Aron Company for $7,000 under credit terms of 1/10, 1/30, FOB destination, invoice dated August 1.

Answer 1

Lowe's
Date	General Journal	Debit	Credit	Calculation
1-Aug	Inventory	7,000
	Accounts Payable-Aron		7,000
5-Aug	Accounts Receivable-Baird	4,900
	Sales		4,900
	Cost of goods sold	3,000
	Inventory		3,000
8-Aug	Inventory	6,000
	Accounts Payable-Waters		6,000
9-Aug	Delivery Expense	110
	Cash		110
10-Aug	Sales Returns & Allowances	1,000
	Accounts Receivable-Baird		1,000
	Inventory	500
	Cost of goods sold		500
12-Aug	Accounts Payable-Waters	600
	Inventory		600
14-Aug	Accounts Payable-Aron	490
	Cash		490
15-Aug	Cash	3,822			2/10, n/60 means 2% cash discount if paid within 10 days or else full invoice amount to be paid within 60 days
	Sales discounts	78		=3,900*2%
	Accounts Receivable-Baird		3,900	=4,900-1,000
18-Aug	Accounts Payable-Waters	5,400		=6,000-600
	Cash		5,346
	Inventory		54	=5,400*1%	1/10, n/45
19-Aug	Accounts Receivable-Tux	4,200
	Sales		4,200
	Cost of goods sold	2,100
	Inventory		2,100
22-Aug	Sales Returns & Allowances	700
	Accounts Receivable-Tux		700
29-Aug	Cash	3,500
	Accounts Receivable-Tux		3,500	=4,200-700	n/10
30-Aug	Accounts Payable-Aron	6,510		=7,000-490
	Cash		6,510