Question

Allied Merchandisers was organized on May 1. Macy Co. is a major customer (buyer) of Allied (seller) products. May 3 Allied made its first and only purchase of inventory for the period on May 3 for 2,000 units at a price of $12 cash per unit (for a total cost of $24,000). 5 Allied sold 1,000 of the units in inventory for $16 per unit (invoice total: $16,000) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $12,000. 7 Macy returns 100 units because they did not fit the customer’s needs (invoice amount: $1,600). Allied restores the units, which cost $1,200, to its inventory. 8 Macy discovers that 100 units are scuffed but are still of use and, therefore, keeps the units. Allied gives a price reduction (allowance) and credits Macy's accounts receivable for $800 to compensate for the damage. 15 Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns, allowances, and any cash discount. Prepare journal entries to record the following transactions for Allied assuming it uses a perpetual inventory system and the gross method .

Answer 1

		Debit	Credit
May 03	Merchandise inventory	24000
	Cash		24000
May 05	Accounts receivable	16000
	Sales		16000
May 05	Cost of goods sold	12000
	Merchandise inventory		12000
May 07	Sales returns and allowances	1600
	Accounts receivable		1600
May 07	Merchandise inventory	1200
	Cost of goods sold		1200
May 08	Sales returns and allowances	800
	Accounts receivable		800
May 15	Cash	13328
	Sales discounts	272		=13600*2%
	Accounts receivable		13600