Question

Allied Parts was organized on May 1, 2013 and made its first purchase of merchandise on May 3. The purchase was for 1,500 units at a price of $11 per unit. On May 5 Allied Parts sold 900 of the units for $15 per unit to Baker Co. Terms of the sale were 2/10 n/60. a. On May 7, Baker returns 315 units because they did not fit the customers needs. Allied Parts restores the units to its inventory. b. On May 8, Baker discovers that 75 units are damaged but are still of some use and therefore, keeps the units. Allied Parts sends Baker a credit memorandum for $525 to compensate for the damage. c. On May 15, Baker discovers that 50 units are the wrong color. Baker keeps 54 of these units because Allied Parts sends a $110 credit memorandum to compensate. Baker returns the remaining 36 units to Allied Parts. Allied Parts restores the 36 returned units to its inventory.

Answer 1

Answer:

the requirements are missing, so I looked for them on similar questions. Journal entries need to be recorded regarding all the transactions with Baker Co.:

May 5, 2013, 900 units sold to Baker Co., credit terms 2/10 n/60

Dr Accounts receivable 13,500

    Cr Sales revenue 13,500

Dr Cost of goods sold 9,900

    Cr Inventory 9,900

a. May 7, 2013, Baker returns 315 units

Dr Sales returns and allowances 4,725

    Cr Accounts receivable 4,725

Dr Inventory 3,465

    Cr Cost of goods sold 3,465

b. May 8, 2013, sales allowance given to Baker to compensate damaged units

Dr Sales returns and allowances 525

    Cr Accounts receivable 525

c. May 15, 2013, sales allowance given to Baker to compensate wrong color of 14 units

Dr Sales returns and allowances 110

    Cr Accounts receivable 110

May 15, 2013, Baker returns 36 units

Dr Sales returns and allowances 540

    Cr Accounts receivable 540

Dr Inventory 396

    Cr Cost of goods sold 396