Prepare journal entries to record the following merchandising transactions of Lou’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 Payable—Aron.
Aug. 1 Purchased merchandise from Aron Company for $8,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1.
5 Sold merchandise to Baird Corp. for $5,600 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise had cost $4,000. 8 Purchased merchandise from Waters Corporation for $7,000 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8. 9 Paid $140 cash for shipping charges related to the August 5 sale to Baird Corp.
10 Baird returned merchandise from the August 5 sale that had cost Lou’s $500 and was sold for $1,000. The merchandise was restored to inventory. 12 After negotiations with Waters Corporation concerning problems with the purchases on August 8, Lou’s received a price reduction from Waters of $700 off the $7,000 of goods purchased. Lou's debited accounts payable for $700.
14 At Aron’s request, Lou’s paid $380 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. 19 Sold merchandise to Tux Co. for $4,800 under credit terms of n/10, FOB shipping point, invoice dated August 19. The merchandise had cost $2,400.
22 Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Lou’s gave a price reduction (allowance) of $800 to Tux, and credited Tux's accounts receivable for that amount.
29 Received Tux’s cash payment for the amount due from the August 19 sale less the price allowance from August 22. 30 Paid Aron Company the amount due from the August 1 purchase.
