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 $10 cash per unit (for a total cost of $20,000).

 5 Allied sold 1,500 of the units in inventory for $14 per unit (invoice total: $21, 00e) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $15, 0ര0.

 7 Macy returns 125 units because they did not fit the customer's needs (invoice amount: $1,750). Allied restores the units, which cost $1,250, to its inventory.

 8 Macy discovers that 200 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 $300 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.

 1 Allied made its first and only purchase of inventory for the period on May 3 for 2,000 units at a price of $10 cash per unit (for a total cost of $20,000).

 2 Allied sold 1,500 of the units in inventory for $14 per unit (invoice total: $21,000) to Macy Co. under credit terms 2/10, n/60.

 3 Record the cost of goods sold.

 4 Macy returns 125 units because they did not fit the customer's needs (invoice amount: $1,750).

 5 Allied restores the units, which cost $1,250, to its inventory. Macy discovers that 200 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 $300 to compensate for the damage.

 7 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

Date	General Journal	Debit	Credit
May 03	Merchandise inventory	20000
	Cash		20000
May 05	Accounts receivable	21000
	Sales		21000
May 05	Cost of goods sold	15000
	Merchandise inventory		15000
May 07	Sales returns and allowances	1750
	Accounts receivable		1750
May 07	Merchandise inventory	1250
	Cost of goods sold		1250
May 08	Sales returns and allowances	300
	Accounts receivable		300
May 15	Cash	18571
	Sales discounts	379		=18950*2%
	Accounts receivable		18950	=21000-1750-300