Question

May		3		Allied made its first and only purchase of inventory for the period on May 3 for 3,000 units at a price of $9 cash per unit (for a total cost of $27,000).
		5		Allied sold 1,500 of the units in inventory for $13 per unit (invoice total: $19,500) to Macy Co. under credit terms 2/10, n/60. The goods cost $13,500 to Allied.
		7		Macy returns 150 units because they did not fit the customer’s needs (invoice amount: $1,950). Allied restores the units, which cost $1,350, to its inventory.
		8		Macy discovers that 150 units are scuffed but are still of use and, therefore, keeps the units. Allied sends Macy a credit memorandum for $750 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.

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.)

Answer 1

May 03	Merchandise inventory	27000
	Cash		27000
May 05	Accounts receivable	19500
	Sales		19500
May 05	Cost of goods sold	13500
	Merchandise inventory		13500
May 07	Sales returns and allowances	1950
	Accounts receivable		1950
May 07	Merchandise inventory	1350
	Cost of goods sold		1350
May 08	Sales returns and allowances	750
	Accounts receivable		750
May 15	Cash	16464
	Sales discounts	336		=16800*2%
	Accounts receivable		16800