Prepare journal entries to record the following merchandising transactions of Lowe’s, which uses the perpetual inventory system

Question

4 years ago

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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 $8,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1. 5 Sold merchandise to Baird Corp. for $5,600 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 $7,000 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8. 9 Paid $210 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 $700 off the $7,000 of goods purchased. 14 At Aron’s request, Lowe’s paid $500 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 $4,800 under credit terms of n/10, FOB shipping point, invoice dated August 19. The merchandise had cost $2,400. 22 Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Lowe’s sent Tux a $800 credit memorandum toward the $4,800 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.

Business

1 answer:

11Alexandr11 [23.1K] · Answer 1 · 2022-01-03T23:54:38+03:00

Answer:

Aug 1 Dr Inventory $8,000

Cr Accounts Payable - Aaron $8,000

Aug 5 Dr Accounts Receivable - Baird Corp $5,600

Cr Sales $5,600

Aug 5 Dr Cost of Good Sold $4,000

Cr Inventory $4,000

Aug 8 Dr Inventory $7,000

Cr Accounts Payable - Walter Corporation $7,000

Aug 9 Dr Freight - Out $210

Cr Cash $210

Aug 10 Dr Sales Return and Allowance $1,000

Cr Accounts Receivable - Baird Corp $1,000

Aug 10 Dr Inventory $500

Cr Cost of Good Sold $500

Aug 12 Dr Accounts Payable - Walter Corporation $700

Cr Inventory $700

Aug 14 Dr Accounts Payable - Aaron $500

Cr Cash $500

Aug 15 Dr Cash $4,508

[(100%-2%)×$4,600]

Dr Discount on Sales $92

[($5,600-$1,000) x2%]

Cr Accounts Receivable - Baird Corp $4,600

($5,600-$1,000)

Aug 18 Dr Accounts Payable - Walter Corporation $6,300

($7,000-$700)

Cr Discount on Purchase $63

[($7,000-$700) x1%]

Cr Cash $6,237

[(100%-1%)×$6,300]

Aug 19 Dr Accounts Receivable - Tux Co $4,800

Cr Sales $4,800

Aug 19 Dr Cost of Good Sold $2,400

Cr Inventory $2,400

Aug 22 Dr Sales Return and Allowance $800

Cr Accounts Receivable - Tux Co $800

Aug 29 Dr Cash $4,000

Cr Accounts Receivable - Tux Co $4,000

($4,800-$800)

Aug 30 Dr Accounts Payable - Aaron $7,500

Cr Cash $7,500

($8,000-$500)

Explanation:

Preparation of Journal entries