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Required information Use the following information for the Exercises below. Allied Merchandisers was organized on May...

Required information Use the following information for the Exercises below. 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 2,000 units at a price of $8 cash per unit (for a total cost of $16,000). 5 Allied sold 1,000 of the units in inventory for $12 per unit (invoice total: $12,000) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $8,000. 7 Macy returns 100 units because they did not fit the customer’s needs (invoice amount: $1,200). Allied restores the units, which cost $800, to its inventory. 8 Macy discovers that 100 units are scuffed but are still of use and, therefore, keeps the units. Allied sends Macy a credit memorandum for $400 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.

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Answer #1

Journal entry in books of  Allied:

Date Account Name Debit Credit
May 3 Merchandise inventory $16000
Cash $16000
(To record purchase of inventory for cash)
May 5 Accounts receivable 12000
Sales revenue 12000
(To record sale on account)
Cost of goods sold 8000
Merchandise inventory 8000
(To record COGS)
May 7 Sales returns and allowances 1200
Accounts receivable 1200
(To record the sales return)
Inventory 800
Cost of goods sold 800
(To record return of goods sold)
May 8 Sales returns and allowances 400
Accounts receivable 400
(To record issue of credit memorandum)
May 15 Cash 10192
Sales returns and allowances (12000 - 1200 -400) * 2% 208
Accounts receivable (12000 - 1200 -400) 10400
(To record payment received for goods sold)

Journal in books of Macy:

May 03   No journal entry required
May 05 Merchandise inventory 12000
       Accounts Payable 12000
(To record purchases)
May 07 Accounts Payable 1200
       Merchandise inventory 1200
(To record purchases return)
May 08 Accounts Payable 400
       Merchandise inventory 400
(To record issue of credit memo)
May 15 Accounts Payable 10400
       Merchandise inventory 208
       Cash 10192
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