Question

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 2,000 units at a price of $7 cash per unit (for a total cost of $14,000).

5 Allied sold 1,000 of the units in inventory for $11 per unit (invoice total: $11,000) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $7,000.

7 Macy returns 100 units because they did not fit the customer’s needs (invoice amount: $1,100). Allied restores the units, which cost $700, to its inventory.

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 $300 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.

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; it purchases these units for resale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

		Debit	Credit
May 03	NO journal entry required
May 05	Merchandise Inventory	11000
	Accounts Payable		11000
May 07	Accounts Payable	1100
	Merchandise Inventory		1100
May 08	Accounts Payable	300
	Merchandise Inventory		300
May 15	Accounts Payable	9600		=11000-1100-300
	Merchandise Inventory		192	=9600*2%
	Cash		9408