Question

Required information

Use the following information for the Exercises below.

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

Allied Merchandisers was organized on May 1. Macy Co. 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 $11 cash per unit (for a total cost of $11,000).
		5		Allied sold 500 of the units in inventory for $15 per unit (invoice total: $7,500) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $5,500.
		7		Macy returns 50 units because they did not fit the customer’s needs (invoice amount: $750). Allied restores the units, which cost $550, to its inventory.
		8		Macy discovers that 50 units are scuffed but are still of use and, therefore, keeps the units. Allied sends Macy a credit memorandum for $350 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. Exercise 4-5 Recording purchases, purchases returns, and purchases allowances LO P1 Prepare the appropriate journal entries for Macy Co. to record each of the May transactions. Macy is a retailer that uses the gross method and a perpetual inventory system, and purchases these units for resale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Transaction List 1 Allied made its first and only purchase of inventory for the period on May 3 for 1,000 units at a price of $11 cash per unit (for a total cost of $11,000). 2 Allied sold 500 of the units in inventory for $15 per unit (invoice total: $7,500) to Macy Co. under credit terms 2/10, n/60. The goods cost $5,500 to Allied. 3 Macy returns 50 units because they did not fit the customer’s needs (invoice amount: $750). Allied restores the units, which cost $550, to its inventory. 4 Macy discovers that 50 units are scuffed but are still of use and, therefore, keeps the units. Allied sends Macy a credit memorandum for $350 toward the original invoice amount to compensate for the damage. 5 Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns, allowances, and any cash discount.

Answer 1

In perpetual inventory method, all purchases, returns & allowances are taken to Inventory account.