Allied Merchandisers was organized on May 1. Macy Co. is a major customer [buyer] of Allied [seller] products.
May 3 Allied made its first and only purchase of inventory for the period on May 3 for 2,000 units at a price of $10 cash per unit [for a total cost of $20,000].
5 Allied sold 1,500 of the units in inventory for $14 per unit [invoice total: $21,000] to Macy Co. under credit terms 2/10, n/60. The goods cost Allied
$15,000.
7 Macy returns 125 units because they did not fit the customer's needs [invoice amount: $1,750]. Allied restores the units, which cost $1,250, to its inventory.
8 Macy discovers that 200 units are scuffed but are still of use and, therefore, keeps the units. Allied sends Macy a credit memorandum for $300 toward the original invoice amount to compensate for the damage.
15 Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns,
allowances, and any cash discount.
May 03 Merchandise inventory 20,000
Cash 20,000
May 05 Accounts receivable 21,000
Sales 21,000
May 05 Cost of goods sold 15,000
Merchandise inventory 15,000
May 07 Sales returns and allowances 1,750
Accounts receivable 1,750
May 07 Merchandise inventory 1,250
Cost of goods sold 1,250
May 08 Sales returns and allowances 300
Accounts receivable 300
May 15 Cash
18,570
Sales discounts 379
Accounts receivable 18,950
Allied Merchandisers was organized on May 1. Macy Co. is a major customer [buyer] of Allied [seller] products.
May 3 Allied made its first and only purchase of inventory for the period on May 3 for 2,000 units at a price of $10 cash per unit [for a total cost of $20,000].
5 Allied sold 1,500 of the units in inventory for $14 per unit [invoice total: $21,000] to Macy Co. under
credit terms 2/10, n/60. The goods cost Allied $15,000.
7 Macy returns 125 units because they did not fit the customer's needs [invoice amount: $1,750]. Allied restores the units, which cost $1,250, to its inventory.
8 Macy discovers that 200 units are scuffed but are still of use and, therefore, keeps the units. Allied sends Macy a credit memorandum for $300 toward the original invoice amount to compensate for the damage.
15 Allied receives payment from Macy for the amount owed on
the May 5 purchase; payment is net of returns, allowances, and any cash discount.
Prepare 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 Payable—Aron.]
Aug. 1 Purchased merchandise from Aron Company for $7,500 under credit terms of 1/10,
n/30, FOB destination, invoice dated August 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 had 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 August 8.
9 Paid $125 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 $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, Lowe's received a credit memorandum from Waters granting a price reduction of $400 off the $5,400 of goods purchased.
14 At Aron's request, Lowe's paid $200 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 $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. Lowe's sent Tux a $500 credit memorandum toward the $4,800 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.
No Date General Journal Debit Credit
1 Aug 01 Merchandise inventory 7,500
Accounts payable—Aron 7,500
2 Aug 05 Accounts receivable—Baird 5,200
Sales 5,200
3 Aug 05 Cost of goods sold 4,000
Merchandise inventory 4,000
4 Aug 08 Merchandise
inventory 5,400
Accounts payable—Waters 5,400
5 Aug 09 Delivery expense 125
Cash 125
6 Aug 10 Sales returns and allowances 600
Accounts receivable—Baird 600
7 Aug 10 Merchandise inventory 400
Cost of goods sold 400
8 Aug 12 Accounts payable—Waters 400
Merchandise inventory 400
9 Aug 14 Accounts payable—Aron 200
Cash 200
10 Aug 15 Cash 4,508
Sales discounts 92
Accounts receivable—Baird 4,600
11 Aug 18 Accounts payable—Waters 5,000
Merchandise inventory 50
Cash 4,950
12 Aug 19 Accounts receivable—Tux 4,800
Sales 4,800
13 Aug 19 Cost of goods sold 2,400
Merchandise inventory 2,400
14 Aug 22 Sales returns and allowances 500
Accounts receivable—Tux 500
15 Aug 29 Cash 4,300
Accounts receivable—Tux 4,300
16 Aug 30 Accounts payable—Aron 7,300
Cash 7,300