Question

May		3		Allied made its first and only purchase of inventory for the period on May 3 for 3,000 units at a price of $12 cash per unit (for a total cost of $36,000).
		5		Allied sold 1,500 of the units in inventory for $16 per unit (invoice total: $24,000) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $18,000.
		7		Macy returns 150 units because they did not fit the customer’s needs (invoice amount: $2,400). Allied restores the units, which cost $1,800, to its inventory.
		8		Macy discovers that 150 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 $1,200 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.

Answer 1

		Debit	Credit
May 03	NO journal entry required
May 05	Merchandise Inventory	24000
	Accounts Payable		24000
May 07	Accounts Payable	2400
	Merchandise Inventory		2400
May 08	Accounts Payable	1200
	Merchandise Inventory		1200
May 15	Accounts Payable	20400		=24000-2400-1200
	Merchandise Inventory		408	=20400*2%
	Cash		19992