Question

Problem 4-2A Preparing journal entries for merchandising activities-perpetual system LO P1, P2

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 $6,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1.
		5		Sold merchandise to Baird Corp. for $4,200 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise had cost $3,000.
		8		Purchased merchandise from Waters Corporation for $5,000 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8.
		9		Paid $140 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 $500 off the $5,000 of goods purchased.
		14		At Aron’s request, Lowe’s paid $170 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 $3,600 under credit terms of n/10, FOB shipping point, invoice dated August 19. The merchandise had cost $1,800.
		22		Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Lowe’s sent Tux a $600 credit memorandum toward the $3,600 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.

  

Answer 1

6000 6000 Journal entrieso Date Account Titles and explanation / Debit credit Marchandise inventory Accounts payable - Aron company to record the purchase of marchandise inventory on account). Augis | Accounts Receirable Baird coop. | 4200 Sales Revenue 4200 to recood the states of marchandise on account), cost of goods sold 3000 Marchandise inventory 3000 to record the cost of goods sold ), Aug. 8 Marchandise Inventory 5000 Accounts payable-water's corp. (16 record the purchase of marchandise - inventory on account ). Aug. a marchandise Inventory. Cash 140 to record the payment of shipping charges Augolo | sales Returns and allowances I 1000 Accounts Receivable - Baired Corp. To record the return of marchandise sold) - Marchandise Inventory. I 500 cost of goods sold 500 To record cost of return marchandise inventory 5000 140 1000

Aug. 12 500 500 Accounts payable waters corp. Marchandise Inventory. Torecord the price reduction from the seller) freight charges Aug. 14 110 170 To record the payment of freight changes Aug. 15 16U 3200 3136 Cash 3200-64 Discount allowed (3200% Poo Accounts receirable-Baised Coop. (o record the receipt of cash from Barred-corp/ within the discount period).. Accounts payable-waters cosporation . USOD C 5000-500 ) Discount Received 4500 * too) cash (usoo-us) to record the payment made to water cosp. within the discount period) Augis 45 4455 ? Ango19 3600 3600 Accounts receivable - Tax Co. sabes Revenue To record the sales of marchandice on accounts) cost of goods sold 1800 I KOD Marchandise (To record the Duventory cost of goods sold)

600 Aug. 22 GOD sales allowance Accounts Receivable. Tharon To record the price reduction given on the credit cale) 3000 Alga29 cash Accounts Receivable - Tun con (3666-600 ) (To record the receipt of cash from Tun.co.) 2000 Aug 30 GOOD accounts payable - Aron company cash (To record the payment made to Ason 6000