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 $7,500 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1. 5 Sold merchandise to Baird Corp. for $5,200 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 $5,400 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8. 9 Paid $125 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 $400 and was sold for $600. 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 $5,400 of goods purchased 14 At Aron's request, Lowe's paid $200 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 $4,800 under credit terms of n/10. FOB shipping point, invoice dated August 19. The merchandise had cost $2,400 22 Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications Lowe's sent Tux $500 credit memorandum toward the $4,800 anvoice to resolve the issue 29 Received Tux cash payment for the amount due from the August 19 sale less the price allowance from August 38 Paid Aran Conpany the amount due from the August 1 purchase

Answer 1

Date	General Journal	Debit	Credit
		$	$
Aug 1	Merchandise Inventory	7,500
	Accounts Payable: Aron		7,500
Aug 5	Accounts Receivable: Baird	5,200
	Sales Revenue		5,200
Aug 5	Cost of Goods Sold	4,000
	Merchandise Inventory		4,000
Aug 8	Merchandise Inventory	5,400
	Accounts Payable: Waters Corporation		5,400
Aug 9	Freight Out	125
	Cash		125
Aug 10	Sales Returns and Allowances	600
	Accounts Receivable: Baird		600
Aug 10	Merchandise Inventory	400
	Cost of Goods Sold		400
Aug 12	Accounts Payable: Waters Corporation	400
	Merchandise Inventory		400
Aug 14	Accounts Payable: Aron	200
	Cash		200
Aug 15	Cash	4,508
	Sales Discounts	92
	Accounts Receivable: Baird		4,600
Aug 18	Accounts Payable: Waters Corporation	5,000
	Merchandise Inventory		50
	Cash		4,950
Aug 19	Accounts Receivable: Tux Co.	4,800
	Sales Revenue		4,800
Aug 19	Cost of Goods Sold	2,400
	Merchandise Inventory		2,400
Aug 22	Sales Returns and Allowances	500
	Accounts Receivable: Tux Co.		500
Aug 29	Cash	4,300
	Accounts Receivable: Tux Co.		4,300
Aug 30	Accounts Payable: Aron	7,300
	Cash		7,300