Question

GL0502 - Based on Problem 5-2A Lowe's Company LO P1, P2

Prepare journal entries to record the following merchandising transactions of Lowe’s, which uses the perpetual inventory system. (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.
Aug.		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.
Aug.		8		Purchased merchandise from Waters Corporation for $5,400 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8.
Aug.		9		Paid $125 cash for shipping charges related to the August 5 sale to Baird Corp.
Aug.		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.
Aug.		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.
Aug.		14		At Aron’s request, Lowe’s paid $200 cash for freight charges on the August 1 purchase, reducing the amount owed to Aron.
Aug.		15		Received balance due from Baird Corp. for the August 5 sale less the return on August 10.
Aug.		18		Paid the amount due Waters Corporation for the August 8 purchase less the price allowance from August 12.
Aug.		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.
Aug.		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 $4,800 invoice to resolve the issue.
Aug.		29		Received Tux’s cash payment for the amount due from the August 19 sale less the price allowance from August 22.
Aug.		30		Paid Aron Company the amount due from the August 1 purchase.

Answer 1

Solution:-

No	Date	General Journal	Debit	Credit
1	Aug 01	Merchandise inventory	7,500
		Accounts payable—Aron		7,500
2	Aug 05	Accounts receivable—Baird	5,200
		Sales		5,200
3	Aug 05	Cost of goods sold	4,000
		Merchandise inventory		4,000
4	Aug 08	Merchandise inventory	5,400
		Accounts payable—Waters		5,400
5	Aug 09	Delivery expense	125
		Cash		125
6	Aug 10	Sales returns and allowances	600
		Accounts receivable—Baird		600
7	Aug 10	Merchandise inventory	400
		Cost of goods sold		400
8	Aug 12	Accounts payable—Waters	400
		Merchandise inventory		400
9	Aug 14	Accounts payable—Aron	200
		Cash		200
10	Aug 15	Cash	4,508
		Sales discounts	92
		Accounts receivable—Baird		4,600
11	Aug 18	Accounts payable—Waters	5,000
		Merchandise inventory		50
		Cash		4,950
12	Aug 19	Accounts receivable—Tux	4,800
		Sales		4,800
13	Aug 19	Cost of goods sold	2,400
		Merchandise inventory		2,400
14	Aug 22	Sales returns and allowances	500
		Accounts receivable—Tux		500
15	Aug 29	Cash	4,300
		Accounts receivable—Tux		4,300
16	Aug 30	Accounts payable—Aron	7,300
		Cash		7,300

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