Allied Parts was organized on May 1, 2015, and made its first purchase of mercha

Question

Allied Parts was organized on May 1, 2015, and made its first purchase of merchandise on May 3. The purchase was for 1,200 units at a price of $11 per unit. On May 5, Allied Parts sold 720 of the units for $15 per unit to Banker Co. Terms of the sale were 2/10, n/60. On May 7, Baker returns 252 units because they did not fit the customer's needs. Allied Parts restores the units to its inventory. On May 8, Baker discovers that 60 units are damaged but are still of some use and, therefore, keeps the units. Allied Parts sends Banker a credit memorandum for $420 to compensate for the damage. On May 15, banker discovers that 72 units are the wrong color, Banker keeps 43 of these units because Allied Parts sends a $92 credit memorandum to compensate Banker returns the remaining 29 units to Allied Parts, Allied Parts restores the 29 returned units to its inventory. Prepare entries for Allied Parts to record the May 5 sale and each of the above separate transactions using a perpetual inventory system.

Explanation / Answer

Accounting Entries:

amount in $

date account title debit credit May5 Accounts receivable 10,800 sales 10,800 cost of goods sold 7,920 Merchandise Inventory 7,920 may7 sales 3,780 Accounts receivable 3,780 Merchandise Inventory 2,772 cost of goods sold 2,772 may 8 Sales returns and allowances 420 accounts receivable 420 May15 sales returns and allowances 527

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