Concept explainers
Exercise 5-4
Recording sales, sales returns, and sales allowances
P2
Allied Merchandisers was organized on May 1. Macy Co. is a major customer (buyer) of Allied (seller) products. Prepare
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 1,500 of the units in inventory for $14 per unit (invoice total:
$21,000) to Macy Co. under credit terms 2/10, ff60. The goods cost Allied $15,000.
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.
8 Macy discovers that 200 units are scuffed but are still of use and, therefore, keeps the units. Allied sends Macy a credit memorandum for $300 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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Chapter 5 Solutions
Fundamental Accounting Principles
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