Accounting I Chapter 5 Problem 2A

Preparing journal entries for merchandising activities Prepare journal entries to record the following merchandising transactions 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 1/10, n/30, FOB destination, invoice dated Aug. 1 5 Sold merchandise to Baird Corp. for $5,200 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise has cost $4,000 8 Purchased merchandise from Waters Corporation for $5,400 under credit terms of 1/10, n/45, FOB shipping point, invoice dated Aug. 8 9 Paid $125 cash for shipping charges related to the Aug. 5 sale to Baird Corp. 10 Baird returned merchandise from the Aug. 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 Aug. 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 Aug. 1 purchase, reducing the amount owed (accounts payable) to Aron 15 Received balance due from Baird Corp. form the Aug. 5 sale less the return on Aug. 10 18 Paid the amount due Waters Corporation for the Aug. 8 purchase less the prices allowance from Aug. 12 19 Sold merchandise to Tux Co. for $4,800 under credit terms of n.10, FOB shipping point, invoice dated Aug. 19. The merchandise has cost $2,400 22 Tux requested a price reduction on the Aug. 19 sale because the merchandise did not meet specifications. Lowes gave a price reduction (allowance) of $500 to Tux and credited Tuxa account receivable for the amount 29 Received Tuxs cash payment for the amount due from the Aug. 19 sale less the price allowance from Aug. 22 30 Paid Aron Company the amount due from the Aug. 1 purchase Check: Aug. 9 dr. delivery expense $125 Aug. 18 dr. cash $4,950 Aug. 29 dr. cash $4,300

Make sure you use the net method for accounting the transactions.