Question

Prepare journal entries to record the following transactions for a retail store. The company uses a perpetual inventory system and the gross method. Apr. 2 Purchased $3,600 of merchandise from Lyon Company with credit terms of 2/15, n/60, invoice dated April 2, and FOB shipping point. 3 Paid $360 cash for shipping charges on the April 2 purchase. 4 Returned to Lyon Company unacceptable merchandise that had an invoice price of $500. 17 Sent a check to Lyon Company for the April 2 purchase, net of the discount and the returned merchandise. 18 Purchased $6,500 of merchandise from Frist Corp. with credit terms of 1/10, n/30, invoice dated April 18, and FOB destination. 21 After negotiations, received from Frist a $500 allowance toward the $6,500 owed on the April 18 purchase. 28 Sent check to Frist paying for the April 18 purchase, net of the allowance and the discount.

Answer 1

Answer:

A Retail Store

Journal Entries:

Apr. 2: Debit Inventory $3,600

Credit Accounts Payable (Lyon Company) $3,600

To record the purchase of inventory on account; FOB Shipping point, credit terms of 2/15, n/60.

Apr. 3: Debit Freight-in $360

Credit Cash $360

To record the payment of freight with cash.

Apr. 4: Debit Accounts Payable (Lyon Company) $500

Credit Inventory $500

To record the return of inventory on account.

Apr. 17: Debit Accounts Payable (Lyon Company) $3,100

Credit Cash $3,038

Credit Cash Discounts $62

To record the payment of cash on account, with discount.

Apr. 18: Debit Inventory $6,500

Credit Accounts Payable (Frist Corp.) $6,500

To record the purchase of inventory on account; FOB destination, credit terms of 1/10, n/30.

Apr. 21: Debit Accounts Payable (Frist Corp.) $500

Credit Inventory $500

To record the allowance received.

Apr. 28: Debit Accounts Payable (Frist Corp.) $6,000

Credit Cash $5,940

Credit Cash Discounts $60

To record the payment of cash on account, with discount.

Explanation:

a) Data and Analysis:

Apr. 2: Inventory $3,600 Accounts Payable (Lyon Company) $3,600. FOB Shipping point, credit terms of 2/15, n/60.

Apr. 3: Freight-in $360 Cash $360

Apr. 4: Accounts Payable (Lyon Company) $500 Inventory $500

Apr. 17: Accounts Payable (Lyon Company) $3,100 Cash $3,038 Cash Discounts $62

Apr. 18: Inventory $6,500 Accounts Payable (Frist Corp.) $6,500. FOB destination, credit terms of 1/10, n/30.

Apr. 21: Accounts Payable (Frist Corp.) $500 Inventory $500

Apr. 28: Accounts Payable (Frist Corp.) $6,000 Cash $5,940 Cash Discounts $60