4-2A (Algo) Preparing journal entries for merchandising activities LO P1, P2 Prepare journal entries to record the following merchandising transactions of Lowe's, which uses the perpetual inventory system and the gross method. August 1 Purchased merchandise from Aron Company for $6,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1. August 5 Sold merchandise to Baird Corporation for $4,200 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise had cost $3,000. August 8 Purchased merchandise from Waters Corporation for $5,000 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8. August 9 Paid $130 cash for shipping charges related to the August 5 sale to Baird Corporation. August 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. August 12 After negotiations with Waters Corporation concerning problems with the purchases on August 8, Lowe's received a price reduction from Waters of $500 off the $5,000 of goods purchased. Lowe's debited accounts payable for $500. August 14 At Aron's request, Lowe's paid $310 cash for freight charges on the August 1 purchase, reducing the amount owed (accounts payable) to Aron. August 15 Received balance due from Baird Corporation for the August 5 sale less the return on August 10. August 18 Paid the amount due Waters Corporation for the August 8 purchase less the price allowance from August 12. August 19 Sold merchandise to Tux Company for $3,600 under credit terms of n/10, FOB shipping point, invoice dated August 19. The merchandise had cost $1,800. August 22 Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Lowe's gave a price reduction (allowance) of $600 to Tux and credited Tux's accounts receivable for that amount. August 29 Received Tux's cash payment for the amount due from the August 19 sale less the price allowance from August 22. August 30 Paid Aron Company the amount due from the August 1 purchase. View transaction list View journal entry worksheet No Date General Journal 1 Aug 01 Merchandise inventory Debit Credit 6.000 Journal entry worksheet < Purchased merchandise from Waters Corporation for $5,000 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8. Note: Enter debits before credits. 16 > Date General Journal Debit Credit Aug 08 Merchandise inventory 5,000 Accounts payable-Waters 5,000 Record entry Clear entry View general journal Journal entry worksheet < 1 16 At Aron's request, Lowe's paid $310 cash for freight charges on the August 1 purchase, reducing the amount owed (accounts payable) to Aron. Note: Enter debits before credits. Date Aug 14 General Journal Debit Credit Record entry Clear entry View general journal Journal entry worksheet Purchased merchandise from Aron Company for $6,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1. 16 > Note: Enter debits before credits. Date General Journal Debit Credit Aug 01 Merchandise inventory 6,000 Accounts receivable-Aron 6,000 Record entry Clear entry View general journal Journal entry worksheet < 3 Record cost of merchandise sold, $3,000. Note: Enter debits before credits. 5 8 16 > Date Aug 05 General Journal Debit Credit Cost of goods sold 3,000 Merchandise inventory 3,000 Record entry Clear entry View general journal Journal entry worksheet < After negotiations with Waters Corporation concerning problems with the purchases on August 8, Lowe's received a price reduction from Waters of $500 off the $5,000 of goods purchased. Lowe's debited accounts payable for $500. Note: Enter debits before credits. 16 > Date General Journal Aug 12 Accounts payable-Waters Debit Credit Record entry Clear entry View general journal Journal entry worksheet < 1 9 10 11 12 16 Sold merchandise to Tux Company for $3,600 under credit terms of n/10, FOB shipping point, invoice dated August 19. Note: Enter debits before credits. Date Aug 19 General Journal Debit Credit Record entry Clear entry View general journal Journal entry worksheet < 1 9 10 11 Record cost of merchandise sold, $1,800. Note: Enter debits before credits. Date Aug 19 12 122 13 16 General Journal Debit Credit Record entry Clear entry View general journal Journal entry worksheet < 1 2 Baird returned merchandise from the August 5 sale that was sold for $1,000. Note: Enter debits before credits. Date Aug 10 General Journal Debit Credit Sales returns and allowances 1,000 1,000 Accounts payable-Baird 16 > Record entry Clear entry View general journal Journal entry worksheet < 2 Sold merchandise to Baird Corporation for $4,200 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. Note: Enter debits before credits. 16 > Date General Journal Debit Credit Aug 05 Accounts payable-Baird 4,200 Sales 4,200 Record entry Clear entry View general journal Journal entry worksheet < 5 Paid $130 cash for shipping charges related to the August 5 sale to Baird Corporation. Note: Enter debits before credits. Date General Journal Debit Credit Aug 09 Delivery expense 130 Cash 130 16 > Record entry Clear entry View general journal Journal entry worksheet < 1 2 7 8 16 > Record the merchandise, cost $500, that was restored to inventory. Note: Enter debits before credits. Date Aug 10 General Journal Debit Credit Merchandise inventory 400 Cost of goods sold 400 Record entry Clear entry View general journal Journal entry worksheet < 1 9 10 11 16 Paid the amount due Waters Corporation for the August 8 purchase less the price allowance from August 12. Note: Enter debits before credits. Date Aug 18 General Journal Debit Credit Record entry Clear entry View general journal Journal entry worksheet < 1 ... 9 10 11 12 13 14 15 16 Received Tux's cash payment for the amount due from the August 19 sale less the price allowance from August 22. Note: Enter debits before credits. Date Aug 29 General Journal Debit Credit Record entry Clear entry View general journal Journal entry worksheet 1161 15 < 1 ... 9 10 11 12 13 14 15 Paid Aron Company the amount due from the August 1 purchase. Note: Enter debits before credits. Date Aug 30 General Journal Debit Credit Record entry Clear entry View general journal Journal entry worksheet < 9 10 16 Received balance due from Baird Corporation for the August 5 sale less the return on August 10. Note: Enter debits before credits. Date Aug 15 General Journal Debit Credit Record entry Clear entry View general journal Journal entry worksheet < 9 10 11 12 13 14 16 Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Lowe's gave a price reduction (allowance) of $600 to Tux and credited Tux's accounts receivable for that amount. Note: Enter debits before credits. Date Aug 22 General Journal Debit Credit Record entry Clear entry View general journal