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 3,000 units at a price of $9 cash per unit (for a total cost of $27,000).
		5		Allied sold 1,500 of the units in inventory for $13 per unit (invoice total: $19,500) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $13,500.
		7		Macy returns 150 units because they did not fit the customer’s needs (invoice amount: $1,950). Allied restores the units, which cost $1,350, 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 $750 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 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; it 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

In the Books of Macy Co.
Journal Entries - Perpetual Inventory System - Gross Method
Date	Account Titles and Explanation	Debit	Credit
May. 3	No journal entry is made because the purchase is made by Allied.
May. 5	Inventory	$19,500
	Accounts Payable - Allied Merchandisers		$19,500
	(To record the purchase of inventory on account)
May. 7	Accounts Payable - Allied Merchandisers	$1,950
	Inventory		$1,950
	(To record the return of inventory purchased on account)
May. 8	Accounts Payable - Allied Merchandisers	$750
	Inventory		$750
	(To record the price reduction in the cost of inventory)
May. 15	Accounts Payable - Allied Merchandisers ($19,500 - $1,950 - $750)	$16,800
	Purchase Discount ($16,800*2/100)		$336
	Cash ($16,800 - $336)		$16,464
	(To record the payment of accounts payable of Allied Merchandisers)