Allied Merchandisers was held on May 1. Macy Co. is a major customer (buyer) of Allied (seller) products. 

May 3 Allied made its first and only inventory purchase for the period on May 3 at a cash price of $11 per unit for 2,000 units (for a total cost of $22,000). 

5 Allied sold 1,000 units in inventory to Macy Co. for $15 per unit (invoice total: $15,000) on loan terms of 2/10, n/60. The goods cost the Allied $11,000. 

7 Macy returns 100 units for not meeting the customer's needs (invoice amount: $1,500). Allied restores units costing $1,100 to its inventory. 

8 Macy discovers that 100 units are worn out but still in use, and therefore retains the units. allied, sends Macy a memorandum of credit of $700 for the original invoice amount to compensate for the damage. 

15 Allied receives payment from Macy for the amount owed on the purchase on May 5; Payment excludes refunds, allowances and any cash discounts. 

Required

Prepare journal entries to record the following transactions for Allied, assuming it uses a perpetual inventory system and gross method.

(Allied estimates returns using an adjustment entry at the end of each year.)

Prepare appropriate journal entries for Macy Co. to record each of its May transactions. Macy's is a retailer that uses the gross method and perpetual inventory system and purchases these units for resale. 

Answer rating: 100% (QA)

Journal entries for Allied May 3 Inventory Asset 22000 Cash Asset 22000 To record the purchase of 20... View the full answer