Question

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. Requirement--eral Journal tab - Journalize the merchandising transactions. The General Ledger, trial balance and schedules of accounts receivable and accounts payable will be updated based on your entries. General Ledger Tab - One of the advantages of general ledger software is that posting is done automatically. To see the detail of all transactions that affect a specific account, or the balance in an account at a specific point in time, click on the General Ledger tab. Trial Balance Tab - General ledger software also automates the preparation of trial balances. A trial balance lists each account from the General Ledger, along with its balance, either a debit or a credit. Total debits should always equal total credits. Income Statement tab - Prepare a multiple-step income statement. Impact on Income tab - Indicate the impact each transaction had on net income.   General Journal General Ledger Trial Balance Schedule of Receivables Schedule of Payables Income Statement Impact on Income--For each transaction, indicate the impact each item had on income and the dollar amount of the change in income, if any. Input decreases to net income as negative values. Upon completion, compare the amount of income with the amount reported on the income statement.

Answer 1

Journal entries in the books of LOWE'S under PERPETUAL INVENTORY SYSTEM

DATE PARTICULARS LF DEBIT CREDIT

AUG 1 Merchandise inventory account Debit $7500

To Aron company account (account payable) $ 7500

Being goods purchased from Aron company on credit basis

AUG 5 Baird corp account (account receivable) DR $5200

To sales account $5200

Cost of goods sold account debit $4000

To Merchandise inventory account $4000

Being inventoy sold at its selling price

August 8 Merchandise inventory account debit $5400

To water corporation (account payable) $5400

being purchased merchandise from water corporation

August 9 Expenses account debit $125

To cash $125

being shipping charges paid for the invoice dated August 5

August 10 Sales returns account debit $400

To Baird corp account (account receivable) $400

being merchandise received by Baird corp

Merchandise inventory account debit $600

To cost of goods sold $600

August 12 Water corporation account (accounts payable) debit $400

To merchandise inventory account $400

Being LOWE's received a credit memorandum from water corporation

August 14 Aron's account (account payable) debit $200

To cash account $200

being frieght charges paid by LOWE's

August 15 cash account debit $4800

To sales discount $400

To Baird corp $5200

Being due balance received from Baird corp

August 18 Water corp account (account payable) Debit $5400   

Sales discount Debit $400

To cash account $5000

being due amount paid to water corp.

August 19 Tux Co. account (account receivable) Debit $4800

To sales $4800

cost of goods sold Debit $2400

To merchandise inventory account $2400

Being merchandise sold to Tux co.

August 22 Sales returnd account Debit $500

To Tux account $500

being discount on sales given by LOWE's

August 29 Cash account Debit $4300

sales discount debit $500

To TUX (accounts receivable) $4800

being amount received from TUX for the invoice dated august 19

August 30 Aron company account (accounts payable) $7300

To cash $7300

being Aron's account settled of the invoice dated August 1