[The following information applies to the questions displayed below.]Allied Merchandisers was organized on May 1. Macy Company is a major customer (buyer) of Allied (seller) products.May 3Allied 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).May 5Allied sold 1,500 of the units in inventory for $14 per unit (invoice total: $21,000) to Macy Company under credit terms 2/10, n/60. The goods cost Allied $15,000.May 7Macy returns 125 units because they did not fit the customer’s needs (invoice amount: $1,750). Allied restores the units, which cost $1,250, to its inventory.May 8Macy discovers that 200 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.May 15Allied 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 Company to record each of the May transactions. Macy is a retailer that uses the gross method and a perpetual inventory system; it purchases these units for resale.

Under perpetual inventory system, inventory account is used for purchase and sale and inventory…

Answered: Allied Merchandisers was organized on…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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[The following information applies to the questions displayed below.]

Allied Merchandisers was organized on May 1. Macy Company 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).
May 5	Allied sold 1,500 of the units in inventory for $14 per unit (invoice total: $21,000) to Macy Company under credit terms 2/10, n/60. The goods cost Allied $15,000.
May 7	Macy returns 125 units because they did not fit the customer’s needs (invoice amount: $1,750). Allied restores the units, which cost $1,250, to its inventory.
May 8	Macy discovers that 200 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.
May 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 Company to record each of the May transactions. Macy is a retailer that uses the gross method and a perpetual inventory system; it purchases these units for resale.

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