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 2,000 units at a price of $10
5 Allied sold 1,500 of the units in inventory for $14 per unit (invoice total: $21,000) to Macy Co. under credit
7 Macy returns 125 units because they did not fit the customer 's needs (invoice amount: $1,750). Allied restores
8 Macy discovers that 200 units are scuffed but are still of use and, therefore, keeps the units. Allied sends cash per unit (for a total cost of $20,000) terms 2/10, n/60. The goods cost Allied $15,000 the units, which cost $1,250, to its inventory. Macy a credit memorandum for $300 toward the original invoice amount to compensate for the damage allowances, and any cash discount.
15 Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns, Exercise 5-4 Recording sales, sales returns, and sales allowances LO P2
Prepare journal entries to record the following transactions for Allied assuming it uses a perpetual inventory system and the gross method. (Allied estimates returns using an adjusting entry at each year-end.)