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
point.
April 3 Paid
April 4 Returned to Lyon Company unacceptable merchandise that had an invoice price of
April 17 Sent a check to Lyon Company for the April 2 purchase, net of the discount and the returned merchandise.
April 18 Purchased
destination.
gross method.
April 2 Purchased
point.
April 3 Paid
April 4 Returned to Lyon Company unacceptable merchandise that had an invoice price of
April 17 Sent a check to Lyon Company for the April 2 purchase, net of the discount and the returned merchandise.
April 18 Purchased
destination.
Ask by Ruiz Hodgson. in the United States
Mar 15,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
Journal Entries:
-
April 2 – Purchase from Lyon Company
- Debit: Inventory $4,600
- Credit: Accounts Payable $4,600
-
April 3 – Payment of Shipping Charges
- Debit: Inventory $320
- Credit: Cash $320
-
April 4 – Return of Unacceptable Merchandise
- Debit: Accounts Payable $500
- Credit: Inventory $500
-
April 17 – Payment to Lyon Company
- Debit: Accounts Payable $4,100
- Credit: Cash $4,018
- Credit: Inventory $82
-
April 18 – Purchase from Frist Corporation
- Debit: Inventory $8,500
- Credit: Accounts Payable $8,500
Solution
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Beyond the Answer
On April 2, the store made its first entry for the purchase of merchandise. This is recorded as a debit to Inventory and a credit to Accounts Payable, reflecting the total purchase amount of
April 2
Debit: Inventory $4,600
Credit: Accounts Payable $4,600
The next day on April 3, shipping charges incurred for the merchandise bought were recorded. Since shipping was FOB shipping point, this cost is added to the inventory value, resulting in a debit to Inventory and a credit to Cash for the
April 3
Debit: Inventory $320
Credit: Cash $320
On April 4, a return of
April 4
Debit: Accounts Payable $500
Credit: Inventory $500
By April 17, the company is ready to pay Lyon Company the outstanding amount after accounting for the discount from the remaining balance. The net purchase amount after the returns and the discount is calculated as
April 17
Debit: Accounts Payable $4,100
Credit: Cash $4,100
Finally, on April 18, purchasing from Frist Corporation involves a debit to Inventory and a credit to Accounts Payable for the full amount of
April 18
Debit: Inventory $8,500
Credit: Accounts Payable $8,500
Now, for some context—it’s like playing a game of Monopoly, where each property (inventory) you acquire increases your total wealth but also comes with costs (payables) and sometimes you need to flip a card (return items).
Next, it’s important to track your cash flow like a game of Jenga! You want to ensure your foundations (accounts) are strong—you don’t want to pull a block (make an error) that leads to a collapse (financial trouble). So, double-checking each entry can save you a lot of headaches later on!
