Question

Required information Use the following information for the Exercises below. [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 1,000 units at a price of $11 cash per unit (for a total cost of $11,000). 5 Allied sold 500 of the unit's in inventory for $15 per unit (invoice total: $7,500) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $5,500. 7 Macy returns 50 units because they did not fit the customer's needs (invoice amount: $750). Allied restores the units, which cost $550, 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 $350 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 4-4 Recording sales, sales returns, and sales allowances LO P2 Prepare journal entries to record the following transactions for Allied assuming it uses a perpetual inventory system and the gross method. (Allied estimates returns using an adjusting entry at each year-end.) View transaction list View journal entry worksheet No Date General Journal Debit Credit

Answer 1

Solution:

Journal Entries - Allied Merchandisers
Event	Particulars	Debit	Credit
3-May	Inventory Dr	$11,000.00
	To Accounts payable		$11,000.00
	(To record inventory purchase)
5-May	Accounts receivables - Macy Dr	$7,500.00
	To Sales revenue		$7,500.00
	(To record sales on account)
5-May	Cost of goods sold Dr	$5,500.00
	To Merchandise Inventory		$5,500.00
	(To record cost of goods sold)
7-May	Sales returns and allowances Dr	$750.00
	To Accounts receivables - Macy		$750.00
	(To record sales return)
7-May	Merchandise inventory Dr	$550.00
	To Cost of goods sold		$550.00
	(Being goods returned taken into inventory)
8-May	Sales returns and allowances Dr	$350.00
	To Accounts receivables - Macy		$350.00
	(Being allowance given to customer)
15-May	Cash Dr	$6,272.00
	Sales discount Dr	$128.00
	To Accounts receivables - Macy		$6,400.00
	(To record collection from customer)