Purchased merchandise from Lyon Company under the following terms: $3,400 price,

Question

Purchased merchandise from Lyon Company under the following terms: $3,400 price, invoice dated April 2, credit terms of 2/15, n/60, and FOB shipping point. Paid $190 for shipping charges on the April 2 purchase. Returned to Lyon Company unacceptable merchandise that had an invoice price of $500. Sent a check to Lyon Company for the April 2 purchase, net of the discount and the returned merchandise. Purchased merchandise from Frist Corp. under the following terms: $7,250 price, invoice dated April 18, credit terms of 2/10, n/30, and FOB destination. After negotiations, received from Frist a $2,030 allowance on the April 18 purchase. Sent check to Frist paying for the April 18 purchase, net of the discount and allowance. Prepare journal entries to record the above transactions for a retail store. Assume a perpetual inventory system.

Explanation / Answer

2-Apr Merchandise Inventory Dr 3400               Accounts payable Cr 3400 ( to record purchase of inventory on account) 3-Apr Freight in Dr 190            Cash Cr 190 ( To record freight charges paid - FOB Shipping) 4-Apr Accounts payable Dr 500           Inventory Cr 500 ( To record goods returned) 17-Apr Accounts payable Dr 2900                Cash Cr 2842                Discount received Cr 58 ( To record payment made (3400 - 500 less disc @2%) 18-Apr Merchandise Inventory Dr 7250               Accounts payable Cr 7250 ( to record purchase of inventory on account) 21-Apr Accounts payable Dr 2030             Allowance received Cr 2030 ( to record allowance received) 28-Apr Accounts payable Dr 5220                Cash Cr 5115.6                Discount received Cr 104.4 ( To record payment made (7250-2030 less disc @2%)

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