Prepare journal entries to record the following merchandising transactions of Brown's, which uses the perpetual inventory system. (Hint: It will help to identify each receivable and payable; for example, record the purchase on August 1 in Accounts Payable-Griffin.) August 1 Purchased merchandise from Griffin Company for $7,700 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1. August 5 Sold merchandise to Clinton Corporation for $5,300 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise had cost $3,200. August 8 Purchased merchandise from Parker Corporation for $5,440 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8. August 9 Paid $325 cash for shipping charges related to the August 5 sale to Clinton Corporation August 10 Clinton returned merchandise from the August 5 sale that had cost Brown's $100 and was sold for $200. The merchandise was restored to inventory. August 12 After negotiations with Parker Corporation concerning problems with the purchases on August 8, Brown's received a credit memorandum from Parker granting a price reduction of $600 off the $5,440 of goods purchased. August 14 At Griffin's request, Brown's paid $300 cash for freight charges on the August 1 purchase, reducing the amount owed to Griffin. August 15 Received balance due from Clinton Corporation for the August 5 sale less the return on August 10. August 18 Paid the amount due Parker Corporation for the August 8 purchase less the price allowance from August 12. August 19 Sold merchandise to Allen Company for $3,800 under credit terms of n/10, FOB shipping point, invoice dated August 19. The merchandise had cost $1,900. August 22 Allen requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Brown's sent Allen a $400 credit memorandum toward the $3,800 invoice to resolve the issue. August 29 Received Allen's cash payment for the amount due from the August 19 sale less the price allowance from August 22. August 30 Paid Griffin Company the amount due from the August 1 purchase.

The transaction analysis is done with the help of the accounting equation. The basic accounting equation is alternatively known as the balance sheet equation is based on the double-entry system which says that for each transaction happening in a business…