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 $10 cash per unit (for a total cost of $30,000). 5 Allied sold 1,500 of the units in inventory for $14 per unit (invoice totali $21,000) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $15,000. 7 Macy returns 150 units because they did not fit the customer's needs (invoice amount: $2,100). Allied restores the units, which cost $1,500, to its inventory. 8 Macy discovers that 150 units are scuffed but are still of use and, therefore, keeps the units. Allied sends Macy a credit memorandum for $900 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.

Answer 1

Solution:

No.	Date	Account Title and Explanation	Debit ($)	Credit ($)
1.	May 03	Merchandise inventory ($10 × 3,000 units)	30,000
		Cash
		(To record the purchase of inventory)
2.	May 05	Accounts Receivable ($14 × 1,500 units)	21,000
		Sales		21,000
		(To record sold of inventory)
3.	May 05	Cost of goods sold ($10 × 1500 units)	15,000
		Merchandise inventory		15,000
		(To record the costvof sale)
4.	May 07	Sales returns and allowances($14 ×150 units)	2,100
		Account Receivable		2,100
		(To record the accepted returns)
5.	May 07	Merchandise inventory ($10 × 150 units)	1,500
		Cost of goods sold		1,500
		(To record the returned goods inventory)
6.	May 08	Sales returns and allowances	900
		Account Receivable		900
		(To record the compensate for damage)
7.	May 15	Cash ($21,000 - $ 2,100 - $900) ×2%	17,640
		Sales Discount	360
		Accounts Receivable		18,000
		(To record the sales discount received payment within discount period)