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 $10 cash per unit (for a total cost of $20,000). 5 Allied sold 1,000 of the units in inventory for $14 per unit (invoice total: $14,000) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $10,000. 7 Macy returns 100 units because they did not fit the customer’s needs (invoice amount: $1,400). Allied restores the units, which cost $1,000, 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 $600 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. 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.) Allied made its first and only purchase of inventory for the period on May 3 for 2,000 units at a price of $10 cash per unit (for a total cost of $20,000). 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 $10 cash per unit (for a total cost of $20,000). 5 Allied sold 1,000 of the units in inventory for $14 per unit (invoice total: $14,000) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $10,000. 7 Macy returns 100 units because they did not fit the customer’s needs (invoice amount: $1,400). Allied restores the units, which cost $1,000, 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 $600 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. Prepare the appropriate journal entries for Macy Co. to record each of the May transactions. May is a retailer that uses the gross method and a perpetual inventory system, and purchase these units for resale. (If no entry is required for a transaction/event, select “No Journal entry required” in the first account field.) Allied made its first and only purchase of inventory for the period on May 3 for 2,000 units at a price of $10 cash per unit (for a total cost of $20,000).
