Question

Required informatlon Use the following information for the Exercises below. Alled Merchandisers was organized on May 1, Macy Co. Is a major customer (buyer) of Allied (seller) products May 3 Allied nade its first and only parchase of inventory for the period on Hay 3 for 2,000 units at . 5 Allied sold 1,000 of the units in inventory f 7 Hacy returns 100 unite because they did not fit the custoner's needs (invoice smount: $1,400). 8 Macy dincovers that 100 un price of $10 cash per unit (for a total cost of $20,000) under eredit terms 2/10, n/60. The goods cost Allied $10,000 Allied restores the units, whieh cost s1,000, to its inventory or $14 per unit (invoice total: $14,000) to Macy Co. its are souffed but are still of use and, therefore, keepa the units. payment is net of Allied sends Macy a credit senorandum for $600 tovard the original invoice amount to compensate for the damage 15 Allied receives paynent from Macy for the smount owed on the Kay S purehase returne, allovances, 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 gerpetual inventory system and the gross method. (Allied estimates returns using an adjusting entry at each year-end) K Prev 6 of 11 Next MacBook Pro 20 g 9 5 3

Answer 1

Solution:

Journal Entries - Allied Merchandiser
Date	Particulars	Debit	Credit
3-May	Inventory Dr	$20,000.00
	To Cash		$20,000.00
	(To record purchase of inventory)
5-May	Accounts receivables Dr	$14,000.00
	To Sales revenue		$14,000.00
	(To record sales on account)
5-May	Cost of goods sold Dr	$10,000.00
	To Inventory		$10,000.00
	(To record COGS)
7-May	Sales return and allowances Dr	$1,400.00
	To Accounts receivables		$1,400.00
	(To record sales returns)
7-May	Inventory Dr	$1,000.00
	To Cost of goods sold		$1,000.00
	(Being goods returned taken into inventory)
8-May	Sales return and allowances Dr	$600.00
	To Accounts receivables		$600.00
	(To record compensation for damages)
15-May	Cash Dr ($12,000*98%)	$11,760.00
	Sales discount Dr	$240.00
	To Accounts receivables		$12,000.00
	(Being cash received)