Question

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

April 2 Purchased $4,200 of merchandise from Lyon Company with credit terms of 2/15, n/60, invoice dated April 2, and FOB shipping point.

April 3 Paid $280 cash for shipping charges on the April 2 purchase.

April 4 Returned to Lyon Company unacceptable merchandise that had an invoice price of $450.

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

April 18 Purchased $7,700 of merchandise from Frist Corporation with credit terms of 1/10, n/30, invoice dated April 18, and FOB destination.

April 21 After negotiations over scuffed merchandise, received from Frist a $600 allowance toward the $7,700 owed on the April 18 purchase.

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

Answer 1

The journal entries for the retail store's transactions include recording purchases, shipping costs, returns, and payments with discounts and allowances, reflecting the perpetual inventory system and gross method accounting.

Step-by-step explanation:

The question relates to preparing journal entries for a retail store using a perpetual inventory system with gross method accounting. The transactions cover purchases, returns, shipping costs, discounts, and allowances from suppliers. Here are the entries:

• April 2: Dr Merchandise Inventory $4,200; Cr Accounts Payable $4,200
• April 3: Dr Merchandise Inventory $280; Cr Cash $280
• April 4: Dr Accounts Payable $450; Cr Merchandise Inventory $450
• April 17: Dr Accounts Payable $3,670 (=$4,200 - $450 - $80 discount); Cr Merchandise Inventory $80; Cr Cash $3,590
• April 18: Dr Merchandise Inventory $7,700; Cr Accounts Payable $7,700
• April 21: Dr Accounts Payable $600; Cr Merchandise Inventory $600
• April 28: Dr Accounts Payable $7,070 (=$7,700 - $600 allowance - $30 discount); Cr Merchandise Inventory $30; Cr Cash $7,040