Prepare journal entries to record the following merchandising transactions of Allou Company, which applies the perpetual inventory system. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 3 in Accounts Payable—Magar.)
July 3 Purchased merchandise from Magar Corp. for $4,100 under credit terms of 1/10, n/30, FOB
destination, invoice dated July 3.
4 At Magar’s request, Allou paid $500 cash for freight charges on the July 3 purchase, reducing
the amount owed to Magar.
7 Sold merchandise to Konop Co. for $2,870 under credit terms of 2/10, n/60, FOB destination, invoice dated July 7. The merchandise had cost $2,049.
10 Purchased merchandise from Payak Corporation for $3,400 under credit terms of 1/10, n/45, FOB shipping point, invoice dated July 10. The invoice showed that at Allou’s request, Payak
paid the $240 shipping charges and added that amount to the bill. (Hint: Discounts are not applied to freight and shipping charges.)
11 Paid $120 cash for shipping charges related to the July 7 sale to Konop Co.
12 Konop returned merchandise from the July 7 sale that had cost Allou $341 and been sold for 470. The merchandise was restored to inventory.
14 After negotiations with Payak Corporation concerning problems with the merchandise purchased on July 10, Allou received a credit memorandum from Payak granting a price reduction of $500.
17 Received balance due from Konop Co. for the July 7 sale less the return on July 12.
20 Paid the amount due Payak Corporation for the July 10 purchase less the price reduction granted.
21 Sold merchandise to Vescio for $2,460 under credit terms of 1/10, n/30, FOB shipping point,
invoice dated July 21. The merchandise had cost $1,707.
24 Vescio requested a price reduction on the July 21 sale because the merchandise did not meet
specifications. Allou sent Vescio a credit memorandum for $360 to resolve the issue.
30 Received Vescio’s cash payment for the amount due from the July 21 sale.
31 Paid Magar Corp. the amount due from the July 3 purchase.
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