Required information Use the following information for the Exercises below. Alli

Question

Required information Use the following information for the Exercises 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 5 Allied sold 1,000 of the units in inventory for 13 per unit (invoice total: $13,000) to Macy Co. 7 Macy returns 100 units because they did not fit the customer 's needs (invoice amount: $1,300). Allied 8 Macy discovers that 100 units are scuffed but are still of use and, therefore, keeps the units. Allied price of $9 cash per unit (for a total cost of $18,000). under credit terms 2/10, n/60. The goods cost $9,000 to Allied. restores the units, which cost $900, to its inventory. sends Macy a credit memorandum for s500 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.

Explanation / Answer

SOLUTION

Following journal entries should be prepared to record the given transactions-

Accounts receivable after recording sales returns and allownaces

=$18,000 - $1,300 - $500 = $16,200

Sales discount = $16,200*2% = $324

Date Accounts titles and Explanation Debit ($) Credit ($) May 3 Merchandise inventory 18,000 Cash 18,000 May 5 Accounts receivable 13,000 Sales 13,000 Cost of goods sold 9,000 Merchandise inventory 9,000 May 7 Sales returns and allowances 1,300 Accounts receivable 1,300 Merchandise inventory 900 Cost of goods sold 900 May 8 Sales returns and allowances 500 Accounts receivable 500 May 15 Cash 15,876 Sales discounts 324 Accounts receivable 16,200

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