Question

Use the following information for the Exercises below. 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 1,000 units at a price of $9 cash per unit (for a total cost of $9,000). 5 Allied sold 500 of the units in inventory for $13 per unit (invoice total: $6,500) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $4,500. 7 Macy returns 50 units because they did not fit the customer’s needs (invoice amount: $650). Allied restores the units, which cost $450, to its inventory. 8 Macy discovers that 50 units are scuffed but are still of use and, therefore, keeps the units. Allied sends Macy a credit memorandum for $250 toward the original invoice amount 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. Exercise 4-5 Recording purchases, purchases returns, and purchases allowances LO P1 Prepare the appropriate journal entries for Macy Co. to record each of the May transactions. Macy is a retailer that uses the gross method and a perpetual inventory system, and purchases these units for resale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Debit Credit No. Date 1. May 03 I No General Journal journal entry required 2. May os $6,500 $6,500 Merchandise Inventory Accounts Payable (To record merchandise inventory) 3. May of $650 Accounts Payable Merchandise Inventory (To second inventory returned) $650 4. May oo * CS0 Accounts Payable Merchandise Inventory (To record credit memorandum) $250 S. May is $5,600 accounts Payable Merchandise Inventory cash (To record cash paid) $ 112 $5,488

Calculation: May s: Merchandise Inventory = = Units X Price 500 units X $6,500 per unit $13 = Accounts Payable per unit = Returned units x = 50 units X Price $13 = $650 Mays May 15: Accounts Payable = (Merchandise Purchased, - Merchandise Returned, may 7 - credit Memorandum - $ 6,500 - $650 – $250 = $5,600 May 15. Merchandise Inventory = (Accounts Payable x Discount Percent) = $5,600 × 2% = $112 mayls Cash = Inventory Accounts Payable - Merchandise - $5,600 – $ 112 = $5,488