Apr. 2 Purchased merchandise from Lyon Company under the following terms: $6,000 price, invoice dated April 2, credit terms of 2/15, n/60, and FOB shipping point. Apr. 3 Paid $336 for shipping charges on the April 2 purchase.
Apr. 4 Returned to Lyon Company unacceptable merchandise that had an invoice price of $750.
Apr. 17 Sent a check to Lyon Company for the April 2 purchase, net of the discount and the returned merchandise.
Apr. 18 Purchased merchandise from Frist Corp. under the following terms: $12,450 price, invoice dated April 18, credit terms of 2/10, n/30, and FOB destination.
Apr. 21 After negotiations, received from Frist a $3,486 allowance on the April 18 purchase.
Apr. 28 Sent check to Frist paying for the April 18 purchase, net of the discount and allowance.
Prepare journal entries to record the following transactions for a retail store. Assume a perpetual inventory system.

Answer and Explanation:

The Journal entry is shown below:-

1. Merchandise Inventory  Dr, $6,000

         To Accounts Payable - Lyon Company $6,000

(Being purchase of inventory is recorded)

2. Merchandise Inventory  Dr, $336

            To Cash $366

(Being cash paid is recorded)

3. Accounts Payable - Lyon Company  $750

          To Merchandise Inventory $750

(Being returned inventory is recorded)

4. Accounts Payable - Lyon Company   $5,250 ($6,000 - $750)

         To Merchandise Inventory  $105 ($5,250 × 2%)  

        To Cash $5,145

(Being cash paid is recorded)

5. Merchandise Inventory  Dr, $12,450

         To Accounts Payable - First Corp $12,450

(Being purchase of inventory is recorded)

6. Accounts Payable_First Corp  Dr, $3,486

           To Merchandise Inventory $3,486

(Being allowance  is recorded)

7. Accounts Payable - First Corp  Dr, $8,964 ($12,450 - $3,486)

         To Merchandise Inventory  $179 ($8,964 × 2%)

        To Cash $8,785

(Being cash paid is recorded)

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