Use the information in CP6-1 to complete the following requirements.
Info CP6-1
a. Amalgamated sold merchandise to American Fashions at a selling price of $ 230,000. The merchandise had cost Amalgamated $ 175,000.
b. Two days later, American Fashions complained to Amalgamated that some of the merchandise differed from what American Fashions had ordered. Amalgamated agreed to give an allowance of $ 5,000 to American Fashions.
c. Just three days later, American Fashions paid Amalgamated, which settled all amounts owed.
Required:
1. For each of the events (a) through (c), indicate the amount and direction of the effect (1 for increase, 2 for decrease, and NE for no effect) on Amalgamated Textiles in terms of the following items.

2. Which of the above items are likely to be reported on Amalgamated€™s external financial statements, and which items will be combined €œbehind the scenes€ ?
3. Prepare the journal entries that Amalgamated Textiles would record, and show any computations.

Transcribed Image Text:

Sales Gross Revenues and Allowances Sales Discounts Net Sales Goods Sold Profit Sales Returns Cost of