Prepare journal entries to record the following merchandising transactions of Lowe’s, which applies 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 $10,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1. 5 Sold merchandise to Baird Corp. for $7,000 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise had cost $5,000. 8 Purchased merchandise from Waters Corporation for $9,000 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8. 9 Paid $280 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 Lowe’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, Lowe’s received a credit memorandum from Waters granting a price reduction of $900 off the $9,000 of goods purchased. 14 At Aron’s request, Lowe’s paid $270 cash for freight charges on the August 1 purchase, reducing the amount owed 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 $6,000 under credit terms of n/10, FOB shipping point, invoice dated August 19. The merchandise had cost $3,000. 22 Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Lowe’s sent Tux a $1,000 credit memorandum toward the $6,000 invoice to resolve the issue. 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.