Problem 4-2A (Algo) Preparing journal entries for merchandising activities LO P1, P2

Prepar 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 PayableAron.

Aug.1Purchased merchandise from Aron Company for $5,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1.

5Sold merchandise to Baird Corp. for $3,500 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise had cost $2,000.

8Purchased merchandise from Waters Corporation for $4,000 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8.

9Paid $200 cash for shipping charges related to the August 5 sale to Baird Corp.

10Baird 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.

12After negotiations with Waters Corporation concerning problems with the purchases on August 8, Lowe's received a price reduction from Waters of $400 off the $4,000 of goods purchased. Lowe's debited accounts payable for $400.

14At Aron's request, Lowe's paid $460 cash for freight charges on the August 1 purchase, reducing the amount owed (accounts payable) to Aron.

15Received balance due from Baird Corp. for the August 5 sale less the return on August 10.

18Paid the amount due Waters Corporation for the August 8 purchase less the price allowance from August 12.

19Sold merchandise to Tux Co. for $3,000 under credit terms of n/10, FOB shipping point, invoice dated August 19. The merchandise had cost $1,500.

22Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Lowe's gave a price reduction (allowance) of $500 to Tux and credited Tux's accounts receivable for that amount.

29Received Tux's cash payment for the amount due from the August 19 sale less the price allowance from August 22.

30Paid Aron Company the amount due from the August 1 purchase.

VIEW TRANSACTION LIST

JOURNAL ENTRY WOOKSHEET

Purchased merchandise from Aron Company for $5,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1.

Sold merchandise to Baird Corp. for $3,500 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5.

Record cost of merchandise sold, $2,000.

Purchased merchandise from Waters Corporation for $4,000 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8.

Paid $200 cash for shipping charges related to the August 5 sale to Baird Corp.

Baird returned merchandise from the August 5 sale that was sold for $1,000.

Record the merchandise, cost $500, that was restored to inventory.

After negotiations with Waters Corporation concerning problems with the purchases on August 8, Lowe's received a price reduction from Waters of $400 off the $4,000 of goods purchased. Lowe's debited accounts payable for $400.

At Aron's request, Lowe's paid $460 cash for freight charges on the August 1 purchase, reducing the amount owed (accounts payable) to Aron.

Received balance due from Baird Corp. for the August 5 sale less the return on August 10.

Paid the amount due Waters Corporation for the August 8 purchase less the price allowance from August 12.

Sold merchandise to Tux Co. for $3,000 under credit terms of n/10, FOB shipping point, invoice dated August 19.

Record cost of merchandise sold, $1,500.

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 $500 to Tux, and credited Tux's accounts receivable for that amount.

Received Tux's cash payment for the amount due from the August 19 sale less the price allowance from August 22.

Paid Aron Company the amount due from the August 1 purchase.

Use the following information for the Problems 3A-4A below. (Algo)

[The following information applies to the questions displayed below.]

Valley Company's adjusted account balances from its general ledger on August 31, its fiscal year-end, follows. It categorizes the following accounts as selling expenses: sales salaries expense, rent expenseselling space, store supplies expense, and advertising expense. It categorizes the remaining expenses as general and administrative.

Adjusted Account Balances Debit Credit

Merchandise inventory (ending)$40,500

Other (noninventory) assets 162,000

Total liabilities $46,778

Common stock 54,518

Retained earnings 78,547

Dividends 8,000

Sales 277,020

Sales discounts 4,238

Sales returns and allowances18,283

Cost of goods sold 106,939

Sales salaries expense 37,952

Rent expenseSelling space13,020

Store supplies expense 3,324

Advertising expense 23,547

Office salaries expense 34,628

Rent expenseOffice space 3,324

Office supplies expense 1,108

Totals $456,863 $456,863

Beginning merchandise inventory was $32,684. Supplementary records of merchandising activities for the year ended August 31 reveal the following itemized costs.

Invoice cost of merchandise purchases$119,070

Purchases discounts received2,500

Purchases returns and allowances5,715

Costs of transportation-in3,900

Problem 4-3A (Algo) Computing merchandising amounts and formatting income statements LO C1, P4

Required:

1.Compute the company's net sales for the year.

2.Compute the company's total cost of merchandise purchased for the year.

3.Prepar a multiple-step income statement that includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses.

4.Prepar a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses.

Compute the company's net sales for the year.

Required 1

Net Sales

Sales

Net sales

REQUIRED 2

Compute the company's total cost of merchandise purchased for the year.

Cost of Merchandise Purchased

Invoice cost of merchandise purchased

Purchases discounts received

Purchases returns and allowances

Costs of transportation-in

Total cost of merchandise purchased

REQUIRED 3

Prepare a multiple-step income statement that includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses.

VALLEY COMPANY

Income Statement

For Year Ended August 31

Expenses

Selling expenses

Total selling expenses0

General and administrative expenses

Total general and administrative expenses0

Total expenses0

REQUIRED 4

Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses.

VALLEY COMPANY

Income Statement

For Year Ended August 31

Expenses

Total expenses