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Allied Merchandisers was organized on May 1. Macy Co. is a major customer (buyer) of Allied...

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.)
  

Homework Answers

Answer #1
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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