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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 $10 cash per unit (for a total cost of $10,000).
		5		Allied sold 500 of the units in inventory for $14 per unit (invoice total: $7,000) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $5,000.
		7		Macy returns 50 units because they did not fit the customer’s needs (invoice amount: $700). Allied restores the units, which cost $500, to its inventory.
		8		Macy discovers that 50 units are scuffed but are still of use and, therefore, keeps the units. Allied gives a price reduction (allowance) and credits Macy's accounts receivable for $300 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.

• 1

  Allied made its first and only purchase of inventory for the period on May 3 for 1,000 units at a price of $10 cash per unit (for a total cost of $10,000).

• 2

  Allied sold 500 of the units in inventory for $14 per unit (invoice total: $7,000) to Macy Co. under credit terms 2/10, n/60.

• 3

  Record the cost of goods sold.

• 4

  Macy returns 50 units because they did not fit the customer’s needs (invoice amount: $700).

• 5

  Allied restores the units, which cost $500, to its inventory.

• 6

  Macy discovers that 50 units are scuffed but are still of use and, therefore, keeps the units. Allied gives a price reduction (allowance) and credits Macy's accounts receivable for $300 to compensate for the damage.

• 7

  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