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 $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.
		8		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 $240 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 $400 off the $4,000 of goods purchased.
		14		At Aron’s request, Lowe’s paid $240 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.

1- Purchased merchandise from Aron Company for $5,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1.

2- Sold merchandise to Baird Corp. for $3,500 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5.

3- Record cost of merchandise sold, $2,000.

4- Purchased merchandise from Waters Corporation for $4,000 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8.

5- Paid $240 cash for shipping charges related to the August 5 sale to Baird Corp.

6- Baird returned merchandise from the August 5 sale that was sold for $1,000.

7- Record the merchandise, cost $500, that was restored to inventory.

8- 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 $4,000 of goods purchased.

9- At Aron’s request, Lowe’s paid $240 cash for freight charges on the August 1 purchase, reducing the amount owed to Aron.

10- Received balance due from Baird Corp. for the August 5 sale less the return on August 10.

11- Paid the amount due Waters Corporation for the August 8 purchase less the price allowance from August 12.

12- Sold merchandise to Tux Co. for $3,000 under credit terms of n/10, FOB shipping point, invoice dated August 19.

13- Record cost of merchandise sold, $1,500.

14- 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.

15- Received Tux’s cash payment for the amount due from the August 19 sale less the price allowance from August 22.

16- Paid Aron Company the amount due from the August 1 purchase.

Date	General Journal	Debit	Credit
Aug 01

Answer 1

date general journal dr cr

aug 1 merchandise inventory 5000

accounts payable 5000

5 accounts receivable 3500

sales 3500

- COGS 2000

merchandise inventory 2000

8 merchandise inventory 4000

accounts payable 4000

9 delivery expense 240

cash 240

10 sales returns 500

accounts rec. 500

- merchandise inventory 1000

COGS 1000

12 accounts payable 400

merchandise inventory 400

15 cash

sale discount

accounts rec. 3500

18 accounts payable

merchandise inv.

cash

19. accounts rec. 3000

sales 3000

COGS 1500

Inventory 1500

22 sales return 500

accounts rec. 500