Chapter 4, Problem 2GLP

The General Ledger tool in Connect automates several of the procedural steps in the accounting cycle so that the accounting professional can focus on the impacts of each transaction on the various financial reports. The following General Ledger questions highlight the operating cycle of a merchandising company. In each case, the trial balance is automatically updated from the journal entries recorded.

GL 4-2 Based on Problem 4-2 A

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    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 form 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.