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 $12 cash per unit (for a total cost of $24,000) May 5 Allied sold 1,000 of the units in inventory for $16 per unit (invoice total: $16,000) to Macy Company under credit terms 2/10, n/60. The goods cost Allied $12,000. May 7 Macy returns 100 units because they did not fit the customer's needs (invoice amount: $1,600). Allied restores the units, which cost $1,200, to its inventory. May 8 Macy discovers that 100 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 $800 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. Use the above informations, analyze each transaction by indicating its effects on the income statement-specifically, identify the accounts and amounts (including + or -) for each transaction. May 3 May 7 Income Statement Components Increase or Decrease May 5 Increase or Decrease Amount Amount Increase or Decrease Amount Sales Sales discounts Sales returns and allowances Net sales Cost of goods sold Gross profit May 8 Increase or Decrease Amount May 15 Increase or Decrease Amoun
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 $12 cash per unit (for a total cost of $24,000) May 5 Allied sold 1,000 of the units in inventory for $16 per unit (invoice total: $16,000) to Macy Company under credit terms 2/10, n/60. The goods cost Allied $12,000. May 7 Macy returns 100 units because they did not fit the customer's needs (invoice amount: $1,600). Allied restores the units, which cost $1,200, to its inventory. May 8 Macy discovers that 100 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 $800 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. Use the above informations, analyze each transaction by indicating its effects on the income statement-specifically, identify the accounts and amounts (including + or -) for each transaction. May 3 May 7 Income Statement Components Increase or Decrease May 5 Increase or Decrease Amount Amount Increase or Decrease Amount Sales Sales discounts Sales returns and allowances Net sales Cost of goods sold Gross profit May 8 Increase or Decrease Amount May 15 Increase or Decrease Amoun
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please help me to solve this problem
Transcribed Image Text: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 $12
cash per unit (for a total cost of $24,000).
May 5
Allied sold 1,000 of the units in inventory for $16 per unit (invoice total: $16,000) to Macy Company under
credit terms 2/10, n/60. The goods cost Allied $12,000.
May 7
Macy returns 100 units because they did not fit the customer's needs (invoice amount: $1,600). Allied restores
the units, which cost $1,200, to its inventory.
May 8
Macy discovers that 100 units are scuffed but are still of use and, therefore, keeps the units. Allied gives al
price reduction (allowance) and credits Macy's accounts receivable for $800 to compensate for the damage.
Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns,
allowances, and any cash discount.
May 15
21
Use the above informations, analyze each transaction by indicating its effects on the income statement-specifically, identify the
accounts and amounts (including + or -) for each transaction.
May 3
May 5
Income Statement Components
Increase or
Decrease
May 7
Increase or
Decrease
Increase or
Decrease
Amount
Amount
Amount
Sales
Sales discounts
Sales returns and allowances
Net sales
Cost of goods sold
Gross profit
ces
May 8
Increase or
Decrease
Amount
May 15
Increase or
Decrease
Amount
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education