"Problem 5-2A Preparing journal entries for merchandising activities P1 P2 Prepare journal entries to record the following merchandising transactions of Lowes, which uses the perpetual inventory system and the gross method. Aug. 1 Purchased merchandise from Aron Company for $7,500 under credit terms of 110, n30, FOB destination, invoice dated August 1. 5 Sold merchandise to Baird Corp. for $5,200 under credit terms of 210, n60, FOB destination, invoice dated August 5. The merchandise had cost $4,000. 8 Purchased merchandise from Waters Corporation for $5,400 under credit terms of 110, n45, FOB shipping point, invoice dated August 8. 9 Paid $125 cash for shipping charges related to the August 5 sale to Baird Corp. Check Aug. 9, Dr. Delivery Expense, $125 10 Baird returned merchandise from the August 5 sale that had cost Lowes $400 and was sold for $600. The merchandise was restored to inventory. 12 After negotiations with Waters Corporation concerning problems with the purchases on August 8, Lowes received a price reduction from Waters of $400 off the $5,400 of goods purchased. Lowes debited accounts payable for $400. 14 At Arons request, Lowes paid $200 cash for freight charges on the August 1 purchase, reducing the amount owed (accounts payable) 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.

Aug. 18, Cr. Cash, $4,950 19 Sold merchandise to Tux Co. for $4,800 under credit terms of n10, FOB shipping point, invoice dated August 19. The merchandise had cost $2,400. 19422 Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Lowes gave a price reduction (allowance) of $500 to Tux and credited Tuxs accounts receivable for that amount. 29 Received Tuxs cash payment for the amount due from the August 19 sale less the price allowance from August 22.

Aug. 29, Dr. Cash, $4,300

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