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 1,000 units at a price of $9 cash per unit (for a total cost of $9,000).
5 Allied sold 500 of the units in inventory for $13 per unit (invoice total: $6,500) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $4,500.
7 Macy returns 50 units because they did not fit the customer’s needs (invoice amount: $650). Allied restores the units, which cost $450, to its inventory.
8 Macy discovers that 50 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 $250 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.)

llied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns, allowances, and any cash discount.
Note: Enter debits before credits.

Answer 1

The journal entries for Macy Co. to record each of the May transactions are provided step-by-step, including debits and credits for each entry.

Step-by-step explanation:

The journal entries for Macy Co. to record each of the May transactions are as follows:

May 3:

Debit: Inventory - $9,000

Credit: Cash - $9,000

May 5:

Debit: Accounts Receivable - $6,500

Credit: Sales Revenue - $6,500

Debit: Cost of Goods Sold - $4,500

Credit: Inventory - $4,500

May 7:

Debit: Sales Returns and Allowances - $650

Credit: Accounts Receivable - $650

Debit: Inventory - $450

Credit: Cost of Goods Sold - $450

May 8:

Debit: Accounts Receivable - $250

Credit: Sales Returns and Allowances - $250

May 15:

Debit: Cash - $6,355 ($6,500 - $650 - $250)

Debit: Sales Returns and Allowances - $250

Credit: Accounts Receivable - $6,605 ($6,500 + $650 - $250)

Credit: Cash Discount - $10 ($650 x 2% discount)