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 $100 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 $800 off the $8,000 of goods purchased.
		14		At Aron’s request, Lowe’s paid $230 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 $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 sent Tux a $900 credit memorandum toward the $5,400 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.

  

Answer 1

Aug
1	Merchandise inventory	$            9,000
	Accounts payable-Aron Company		$          9,000
5	Accounts receivable-Baird Corp.	$            6,300
	Sales		$          6,300
	Cost of goods sold	$            4,000
	Merchandise inventory		$          4,000
8	Merchandise inventory	$            8,000
	Accounts payable-Waters Corporation		$          8,000
9	Carriage outward	$               100
	Cash		$              100
10	Sales	$            1,000
	Accounts receivable-Baird Corporation		$          1,000
	Merchandise inventory	$               500
	Cost of goods sold		$              500
12	Accounts payable-Waters Corporation	$               800
	Merchandise inventory		$              800
14	Accounts payable-Aron Company	$               230
	Cash		$              230
15	Cash [5300*98%]	$            5,194
	Sales discounts	$               106
	Accounts receivable-Baird Corporation [6300-1000]		$          5,300
18	Accounts payable-Waters Corporation [8000-800]	$            7,200
	Merchandise inventory [7200*1%]		$                72
	Cash [5400-54]		$          7,128
19	Accounts receivable-Tux Co	$            5,400
	Sales		$          5,400
	Cost of goods sold	$            2,700
	Merchandise inventory		$          2,700
22	Sales returns and allowances	$               900
	Accounts receivable-Tux Co		$              900
29	Cash	$            4,500
	Accounts receivable-Tux Co [5400-900]		$          4,500
30	Accounts payable-Aron Company [9000*99%-230}	$            8,680
	Merchandise inventory	$                  90
	Cash		$          8,770