Question

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

Apr. 2 Purchased \(4,600 of merchandise from Lyon Company with credit terms of 2∕15, n∕60, invoice dated April 2, and FOB shipping point.

3 Paid \)300 cash for shipping charges on the April 2 purchase.

4 Returned to Lyon Company unacceptable merchandise that had an invoice price of \(600.

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

18 Purchased \)8,500 of merchandise from Frist Corp. with credit terms of 1∕10, n∕30, invoice dated April 18, and FOB destination.

21 After negotiations, received from Frist a \(500 allowance toward the \)8,500 owed on the April 18 purchase.

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

Short answer

Answer

Both credit and debit sides of the journal amount to$26,500 each.

Step-by-step solution

Step-by-Step SolutionStep 1: Definition of Purchase Returns

The goods returned by the buyer to the supplier due to the wrong product or any defect are reported as purchase returns.

Journal entries

Date	Accounts and Explanation	Debit $	Credit $
2 April	Merchandise inventory	$4,600
	Account payable – Lyon		$4,600
3 April	Freight in	300
	Cash		300
4 April	Account payable – Lyon	600
	Inventory		600
17 April	Account payable – Lyon	4,000
	Discount received		80
	Cash		3,920
18 April	Merchandise inventory	8,500
	Account payable – Frist Corp.		8,500
21 April	Account payable	500
	Allowance inventory		500
28 April	Account payable – Frist Corp.	8,000
	Discount received		80
	Cash		7,920
		$26,500	$26,500