Question

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UNUL Cal completion. 3 Return to que Required information [The following information applies to the questions displayed 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 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: $21,800) to Macy Co. under credit terms 2/10, n/6e. The goods cost Allied $15,000. 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 sends Macy a credit memorandum for $300 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. 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 < Prev 3 of 5 Next > to search

Answer 1

The terms 2/10, n/60 means the following: 2/10 means: '2' indicates the discount percentage and '10' indicates the number of days from the date of invoice (May 05) within which buyer or Customer has to pay the amount owed to the seller or supplier to avail (or to qualify for the discount of 2% ► N/60 states that if the buyer or customer is not able to pay the invoice amount within 10 days to avail 2% discount, then the entire invoice amount is due within 60 days from the date of invoice. Since Macy Co, paid the amount it owe to Allied merchandisers within the discount period (Within 10 days from May 05), Macy Co. is eligible for the discount of 2%.

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Journal entries for Macy Co.
No.	Date	General Journal	Debit	Credit
1	May 03	No Journal entry required
2	May 05	Merchandise Inventory	$21,000
		Accounts Payable		$21,000
		(To record credit purchases)
3	May 07	Accounts payable	$1,750
		Merchandise Inventory		$1,750
		(To record the purchase return)
4	May 08	Accounts payable	$300
		Merchandise Inventory		$300
		(To record credit memo received from Allied merchandisers)
5	May 15	Accounts payable                       [Purchases - Purchase returns - Scuffed = $21,000 - $1,750 - 300]	$18,950
		Merchandise Inventory     [Discount = Amount payable x 2% = (Purchases - Purchase returns - Scuffed = ($21,000 - $1,750 - $300) x 2%]		$379
		Cash                                 [Purchases - Purchase returns - Scuffed - Discount = $21,000 - $1,750 - $300 - $379]		$18,571
		(To record the payment made to Allied merchandisers)