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 $5,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1. 5 Sold merchandise to Baird Corp. for $3,500 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise had cost $2,000. B Purchased merchandise from Waters Corporation for $4,000 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8. 9 Paid $230 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 B, Lowe's received a credit memorandum from Waters granting a price reduction of $400 of the $4,000 of goods purchased. 14 At Aron's request, Lowe's paid $140 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 $3,000 under credit terms of n/10, FOB shipping point, invoice dated August 19. The merchandise had cost $1,500. 22 Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Lowe's sent Tux a $500 credit memorandum toward the $3,000 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. View transaction list View journal entry worksheet No Date General Journal Debit Credit

Answer 1

Answer:

Journal Entries:

Date	Account title and explanation	Debit	Credit
Aug.1	Merchandise inventory	$5,000
	Accounts payable-Aron		$5,000
	[To record purchased Merchandise inventory on account]
Aug.5	Accounts receivable-Baird Corp.	$3,500
	Sales revenue		$3,500
	[To record sales on account]
	Cost of goods sold	$2,000
	Merchandise inventory		$23,000
	[To record cost of goods sold]
Aug.8	Merchandise inventory	$4,000
	Accounts payable-Water		$4,000
	[To record purchased Merchandise inventory on account]
Aug.9	Freight-out	$230
	Cash		$230
	[To record payment of freight]
Aug.10	Sales returns and allowance	$1,000
	Accounts receivable		$1,000
	[To record sales returns]
	Merchandise inventory	$500
	Cost of goods sold		$500
	[To record cost of sales returns]
Aug.12	Accounts payable-Water	$400
	Merchandise inventory		$400
	[To record purchase allowance from creditor]
Aug.14	Accounts payable-Aron	$140
	Cash		$140
	[To record payment of freight at the request of Aron]
Aug.15	Cash	$2,450
	Sales discount [2,500 x 2%]	$50
	Accounts receivable-Baird [3,500-100]		$2,500
	[To record cash collected from customers]
Aug.18	Accounts payable-Water [4,000-400]	$3,600
	Merchandise inventory [3,600 x 1%]		$36
	Cash		$3,564
	[To record cash paid to creditors]
Aug.19	Accounts receivable-Tux	$3,000
	Sales revenue		$3,000
	[To record sales on account]
	Cost of goods sold	$1,500
	Merchandise inventory		$1,500
	[To record cost of goods sold]
Aug.22	Sales returns and allowance	$500
	Accounts receivable-Tux		$500
	[To record allowance given to customers]
Aug.29	Cash	$2,500
	Accounts receivable-Tux [3,000-500]		$2,500
	[To record cash collections from customers]
Aug.30	Accounts payable-Aron [5,000-140 freight]	$4,860
	Cash		$4,860
	[To record payment to creditors]