Chapter 4, Problem 3E

Exercise 4-3 Recording purchase, purchase returns and purchase allowances P1

Prepare journal entries to record the following transaction for a retail store. The company uses a perpetual inventory system and gross method.

Apr 2 Purchased $4,600 of merchandise from Lyon Company with credit terms of $2/15, n/60, invoice dated April 2, and FOB shipping point.

3 Paid $300 cash for shipping charges on the April 2 purchase.

4 Returned to Lyon Company unacceptable merchandise that had an invoice price of $600.

17 Sent a check to Lyon company for the April 2 purchase, net of the discount and the returned merchandise.

18 Purchased $8,500 of merchandise from Frist Corp. with credit terms of 1/10, n/30, invoice dated April 18, FOB destinations.

21 After negotiations, received from Frist a $500 allowance towards the owed on the April 18 Purchase.

28 Sent check to Frist paying for the April 18 purchase, net of the allowance and the discount.