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Accounting
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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 1,000 units at a price of $10 cash per unit (for a total cost of $10,000).
May 5
Allied sold 500 of the units in inventory for $14 per unit (invoice total: $7,000) to Macy Company under credit terms 2/10, n/60. The goods cost Allied $5,000.
May 7
Macy returns 50 units because they did not fit the customers needs (invoice amount: $700). Allied restores the units, which cost $500, to its inventory.
May 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.
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.
Exercise 5-8 (Algo) Recording purchases, purchases returns, and purchases allowances LO P1
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.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
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