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Apr. 2 Purchased $7,000 of merchandise from Lyon Company with credit terms of 2/15, n/60, invoice dated April 2, and FOB shipping point. 3 Paid $210 cash for shipping charges on the April 2 purchase. 4 Returned to Lyon Company unacceptable merchandise that had an invoice price of $700. 17 Sent a check to Lyon Company for the April 2 purchase, net of the discount and the returned merchandise. 18 Purchased $13,300 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 $13,300 owed on the April 18 purchase. 28 Sent check to Frist paying for the April 18 purchase, net of the allowance and the discount.Prepare journal entries to record the above transactions for a retail store.

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Answer:

Journal entries to record transactions:

Apr 2 - Debit Purchases Account with $7,000

Credit Accounts Payable (Lyon Company) with $7,000

Being purchase of goods on account

Apr 3 Debit Shipping Charges with $210

Credit Cash with $210

Being shipping charges paid for goods bought FOB shipping point

Apri 4 Debit Accounts Payable (Lyon Company) with $700

Credit Purchases Returns with $700

Being goods returned to Lyon Company

Apr 17 - Debit Accounts Payable (Lyon Company) with $6,300

Credit Cash Account with $6,174

Credit Cash Discounts with $126

Being settlement on account

Apr 18 - Debit Purchases Account with $13,300

Credit Accounts Payable (First Corporation) with $13,300

Being purchase of goods on account

Apr 21 - Debit Accounts Payable (First Corporation) with $500

Credit Purchases Allowance with $500

Being negotiated allowance for goods purchased

Apri 28 - Debit Accounts Payable (First Corporation) with $12,800

Credit Cash Account with $12,672

Credit Cash Discounts with $128

Being settlement on account

Explanation:

1) April 2: Goods are purchased from Lyon Company, Purchases Account is debited while Accounts Payable is credited.

2) April 3: Shipping charges were paid for goods.  Shipping charges account is debited and Cash Account is credited.

3) April 4: Goods are returned to Lyon worth $700.  Lyon's account is debited with a credit to Purchases Returns Account.

4) April 17: Payment is made to Lyon on account within the discount window.  The cash discount is taken into account.  The amount to be paid is net of the returns and Discount at 2% of this net (2% of ($7,000 - $700)).

5) April 18: Goods bought from First Corporation; Purchases Account is debited while First Corporation is credited.

6) April 21: When $500 Allowance is negotiated, First Corporation's Account is debited to reduce the balance on account.

April 28: Payment is made to First Corporation with a debit to the account and credits to Cash Account and Discount Account.  The discount is 1% of net allowance ($13,300 - 500).  The Cash payment is after subtracting the discount.

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