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 $11 cash per unit (for a total cost of $22, 000). May 5 Allied sold 1,000 of the units in inventory for $15 per unit (invoice total: $15, 000) to Macy Company under credit terms 2/10, n/60. The goods cost Allied $11,000. May 7 Macy returns 100 units because they did not fit the customer's needs (invoice amount: $1,500). Allied restores the units, which cost $1, 100, 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 $700 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 4 - 6 (Algo) Recording sales, sales returns, and sales allowances LO P2 Prepare journal entries to record the following transactions for Allied assuming it uses a perpetual inventory system and the gross method.

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 $11 cash per unit (for a total cost of $22, 000). May 5 Allied sold 1,000 of the units in inventory for $15 per unit (invoice total: $15, 000) to Macy Company under credit terms 2/10, n/60. The goods cost Allied $11,000. May 7 Macy returns 100 units because they did not fit the customer's needs (invoice amount: $1,500). Allied restores the units, which cost $1, 100, 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 $700 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 4 - 6 (Algo) Recording sales, sales returns, and sales allowances LO P2 Prepare journal entries to record the following transactions for Allied assuming it uses a perpetual inventory system and the gross method.

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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