Question

Exercise 4-3 (Algo) Recording purchases, purchases returns, and purchases allowances LOP1 Prepare journal entries to record the following transactions for a retall store. The company uses a perpetual inventory system and the gross method. April 2 Purchased $6,400 of merchandise from Lyon Company with credit terms of 2/15,n/60, invoice dated April Aprit 3 , and FOB shipping point. April 3 Paid $300 cash for shipping charges on the April 2 purchase. April 4 Returned to Lyon Company unacceptable merchandise that had an involce price of $750. April 17 Sent a check to Lyon Coepany for the April 2 purchase, net of the discount and the returned merchandise. April 18 Purchased $12,100 of merchandise from Frist Corporation with credit terns of 1/10,n/30, invoice dated April 18, and F08 destination. April 21 After negotiations over scuffed merchandise, received from frist a $600 allowance toward the $12,100 April 28 Sent check to Frist paying for the Aprit 18 purchase, net of the atlowance and the discount.

Answer 1

Journal entries for the retail store's transactions include recording the purchases of merchandise, shipping charges, returns, discounts from the payment of invoices, and allowances received for any discrepancies in the merchandise. The entries reflect the use of a perpetual inventory system and the gross method for recording purchases and discounts.

Step-by-step explanation:

Journal Entries for Transactions

To record the transactions for the retail store, you would need to make several journal entries to reflect the purchases, returns, allowances, and payments made. Here's a step-by-step explanation:

April 2: Purchased merchandise of $6,400.

Debit Merchandise Inventory $6,400

Credit Accounts Payable $6,400

April 3: Paid shipping charges of $300.

Debit Merchandise Inventory $300

Credit Cash $300

April 4: Returned merchandise worth $750.

Debit Accounts Payable $750

Credit Merchandise Inventory $750

April 17: Paid for April 2 purchase with discount.

Debit Accounts Payable $5,650

Credit Merchandise Inventory $130 (discount 2% of $6,400 - $750)

Credit Cash $5,520

April 18: Purchased merchandise of $12,100.

Debit Merchandise Inventory $12,100

Credit Accounts Payable $12,100

April 21: Received an allowance of $600.

Debit Accounts Payable $600

Credit Merchandise Inventory $600

April 28: Paid for April 18 purchase with discount and allowance.

Debit Accounts Payable $11,500

Credit Merchandise Inventory $115 (discount 1% of $12,100 - $600)

Credit Cash $11,385

Note that discounts are calculated after subtracting any returns or allowances from the purchase amount.