Question

Required information [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 3,000 units at a price of $9 cash per unit (for a total cost of $27,000). 5 Allied sold 1,500 of the units in inventory for $13 per unit (invoice total: $19,500) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $13,500. 7 Macy returns 150 units because they did not fit the customer's needs (invoice amount: $1,950). Allied restores the units, which cost $1,350, to its inventory. 8 Macy discovers that 150 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 $750 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.

Answer 1

WORKING NOTES:
	CALCULATION OF NET AMOUNT RECEIVALBE FROM MACY CO.
	Sales Value =	$                  19,500
	Less: Sales Returns & allowanes	$                     1,950
	Less: Sales Returns & allowanes	$                        750
	Net Receivable	$                  16,800
	Less: Cash discount 2% of $ 16,880 for payment made within 10 Days(Crdit terms 2/10 , n/60)	$                        336
	Received cash from Maacy Co.	$                  16,464
SOLUTION : ENTRY NO. 7
Journal Entries
Date	Account Title and explanation	Debit	Credit
May, 15	Cash	$                  16,464
	Sales Discount	$                        336
	Account Receivable		$                     16,800