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 5 Allied sold 1,500 of the units in inventory for $14 per unit (invoice total: $21,000) to Macy Co. under credit 7 Macy returns 125 units because they did not fit the customer 's needs (invoice amount: $1,750). Allied restores 8 Macy discovers that 200 units are scuffed but are still of use and, therefore, keeps the units. Allied sends cash per unit (for a total cost of $20,000) terms 2/10, n/60. The goods cost Allied $15,000 the units, which cost $1,250, to its inventory. Macy a credit memorandum for $300 toward the original invoice amount to compensate for the damage allowances, and any cash discount. 15 Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns, Exercise 5-4 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 Journal entry worksheet 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).
Note: Enter debits before credits. Date General Journal Debit Credit May 03

Answer 1

Answer:

May 3 No Journal Entry

May 5

Dr Merchandise Inventory 21,000

Cr Accounts Payable 21,000

May 7

Dr Accounts Payable 1,750

Cr Merchandise Inventory 1,750

May 8

Dr Accounts Payable 300

Cr Merchandise Inventory 800

May 15

Dr Accounts Payable 18,950

Cr Merchandise Inventory 379

Cr Cash 18,571

Explanation:

Preparation of Journal entries

May 3 No Journal Entry

May 5

Dr Merchandise Inventory 21,000

(1,500 * $14 per unit )

Cr Accounts Payable 21,000

(To record the purchase of inventory)

May 7

Dr Accounts Payable 1,750

Cr Merchandise Inventory 1,750

(To record the purchase return)

May 8

Dr Accounts Payable 300

Cr Merchandise Inventory 800

(To record the allowance to Macy)

May 15

Dr Accounts Payable 18,950

($21,000-$1,750-$300)

Cr Merchandise Inventory 379

($21,000-$1,750-$300)*2%

Cr Cash 18,571

($21,000-$1,750-$300)*98%

(To record the payment on account)