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 $9,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1.
		5		Sold merchandise to Baird Corp. for $6,300 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise had cost $4,000.
		8		Purchased merchandise from Waters Corporation for $8,000 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 price reduction from Waters of $800 off the $8,000 of goods purchased. Lowe's debited accounts payable for $800.
		14		At Aron’s request, Lowe’s paid $460 cash for freight charges on the August 1 purchase, reducing the amount owed (accounts payable) 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 $5,400 under credit terms of n/10, FOB shipping point, invoice dated August 19. The merchandise had cost $2,700.
		22		Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Lowe’s gave a price reduction (allowance) of $900 to Tux, and credited Tux's accounts receivable for that amount.
		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

Answer Accounts Titles and Explanation Merchandise Inventory Accounts Payable-Aron Accounts Receivable-Baird Corp. Credit Debit Date Aug 1 9,000 9,000 Aug 5 6,300 Sales 6,300 Cost of Goods Sold Aug 5 4,000 Merchandise Inventory Merchandise Inventory Accounts Payable-Waters Delivery Expense 4,000 Aug 8 8,000 8,000 Aug 9 180 Cash 180 Sales Returns and Allowances Aug 10 1,000 Accounts Receivable-Baird 1,000 Merchandise Inventory Aug 10 500 Cost of Goods Sold 500 Accounts Payable-Waters Merchandise Inventory Accounts Payable-Aron Aug 12 800 800 460 Aug 14 Cash 460 Cash Aug 15 5,194 Sales Discount ($5,300* 2%) Accounts Receivable-Baird Corp. ($6,300 - $1,000) Account Payable-Waters ($8,000- $800) Merchandise Inventory ($7,200 *1%) 106 5,300 Aug 18 7,200 72 Cash 7,128 Accounts Receivable-Tux Aug 19 5,400 Sales 5,400 Cost of Goods Sold Aug 19 2,700 Merchandise Inventory 2,700 Sales Returns and Allowances Aug 22 900 Accounts Receivable-Tux 900 Cash ($5,400 $900) 4,500 Aug 29 Accounts Receivable-Tux 4,500 Accounts Receivable-Aron Aug 30 9,000 Cash 9,000