Prepare journal entries to record the following merchandisingtransactions of Lowe’s, which uses the perpetual inventory systemand the gross method. (Hint: It will help to identify eachreceivable and payable; for example, record the purchase on August1 in Accounts Payable—Aron.) Aug. 1 Purchased merchandise from AronCompany for $4,000 under credit terms of 1/10, n/30, FOBdestination, invoice dated August 1. 5 Sold merchandise to BairdCorp. for $2,800 under credit terms of 2/10, n/60, FOB destination,invoice dated August 5. The merchandise had cost $2,000. 8Purchased merchandise from Waters Corporation for $3,000 undercredit terms of 1/10, n/45, FOB shipping point, invoice datedAugust 8. 9 Paid $140 cash for shipping charges related to theAugust 5 sale to Baird Corp. 10 Baird returned merchandise from theAugust 5 sale that had cost Lowe’s $500 and was sold for $1,000.The merchandise was restored to inventory. 12 After negotiationswith Waters Corporation concerning problems with the purchases onAugust 8, Lowe’s received a credit memorandum from Waters grantinga price reduction of $300 off the $3,000 of goods purchased. 14 AtAron’s request, Lowe’s paid $380 cash for freight charges on theAugust 1 purchase, reducing the amount owed to Aron. 15 Receivedbalance due from Baird Corp. for the August 5 sale less the returnon August 10. 18 Paid the amount due Waters Corporation for theAugust 8 purchase less the price allowance from August 12. 19 Soldmerchandise to Tux Co. for $2,400 under credit terms of n/10, FOBshipping point, invoice dated August 19. The merchandise had cost$1,200. 22 Tux requested a price reduction on the August 19 salebecause the merchandise did not meet specifications. Lowe’s sentTux a $400 credit memorandum toward the $2,400 invoice to resolvethe issue. 29 Received Tux’s cash payment for the amount due fromthe August 19 sale less the price allowance from August 22. 30 PaidAron Company the amount due from the August 1 purchase.
