Question

Prepare the appropriate journal entries for Macy Co. to record each of the May transactions. Macy is a retailer that uses the gross method and a perpetual inventory system, and purchases these units for resale

May		3		Allied made its first and only purchase of inventory for the period on May 3 for 1,000 units at a price of $9 cash per unit (for a total cost of $9,000).
		5		Allied sold 500 of the units in inventory for $13 per unit (invoice total: $6,500) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $4,500.
		7		Macy returns 50 units because they did not fit the customer’s needs (invoice amount: $650). Allied restores the units, which cost $450, to its inventory.
		8		Macy discovers that 50 units are scuffed but are still of use and, therefore, keeps the units. Allied sends Macy a credit memorandum for $250 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

Answer 1

Journal entries: In the books of Macy Co

Date	account and explanation	Debit	Credit
May 3	No entry
May 5	Merchandise inventory	6500
	Account payable		6500
	(To record goods purchased)
May 7	Account payable	650
	Merchandise inventory		650
	(To record purchase return)
May 8	Account payable	250
	Merchandise inventory		250
	(To record purchase allowance)
May 15	Account payable (6500-900)	5600
	Cash		5488
	Merchandise inventory		112
	(To record amount paid)