Question

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: $21,000) to Macy Co. under credit terms 2/10, n/60. 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 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 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:

Date	Account title and explanation	Debit	Credit
May 3	No Entry
May 5	Inventory [1500 x $14]	$ 21,000
	Accounts payable		$ 21,000
	[To record purchase of invenotry on account]
May 7	Accounts payable	$ 1,750
	Inventory [125 x $14]		$ 1,750
	[To record purchase returns]
May 8	Accounts payable	$ 300
	Inventory		$ 300
	[To record purchase allowance]
May 15	Accounts payble [21000-1750-300]	$ 18,950
	Inventory [18950 x 2%]		$ 379
	Cash		$ 18,571
	[To record cash paid for accounts payable]