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 1,000 units at a price of $8 cash per unit (for a total cost of $8,000). | ||
5 | Allied sold 500 of the units in inventory for $12 per unit (invoice total: $6,000) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $4,000. | |||
7 | Macy returns 50 units because they did not fit the customer’s needs (invoice amount: $600). Allied restores the units, which cost $400, 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 $200 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. |
Exercise 4-4 Recording sales, sales returns, and sales allowances LO P2
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.)
May 03 | Merchandise inventory | 8000 | ||
Cash | 8000 | |||
May 05 | Accounts receivable | 6000 | ||
Sales | 6000 | |||
May 05 | Cost of goods sold | 4000 | ||
Merchandise inventory | 4000 | |||
May 07 | Sales returns and allowances | 600 | ||
Accounts receivable | 600 | |||
May 07 | Merchandise inventory | 400 | ||
Cost of goods sold | 400 | |||
May 08 | Sales returns and allowances | 200 | ||
Accounts receivable | 200 | |||
May 15 | Cash | 5096 | ||
Sales discounts | 104 | =5200*2% | ||
Accounts receivable | 5200 |
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