Allied Merchandisers was organized on May 1. Macy Company Is a major customer (buyer) of Alled...

 

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Allied Merchandisers was organized on May 1. Macy Company Is a major customer (buyer) of Alled (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 $7 cash per unit (for a total cost of $7,000). May 5 Allied sold 500 of the units in inventory for $11 per unit (invoice total: $5,5ee) to Macy company under credit terms 2/10, n/60. The goods cost Allied $3,50e. May 7 Macy returns 50 units because they did not fit the customer's needs (invoice amount: $550). Allied restores the units, which cost $35e, to its inventory. May 8 Macy discovers that 5e 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 $15e to compensate for the damage. May 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. Use the above informations, analyze each transaction by Indicating Its effects on the Income statement-specifically, Identify the accounts and amounts (Including + or -) for each transaction. May 3 May 5 May 7 May 8 May 15 Income Statement Components Increase/Decrease Amount Increase/Decrease Amount Increase/Decrease Amount Increase/Decrease Amount Increase/Decrease Amount (+) increase (+) increase Sales 5,500 Sales discounts 96 (+) increase (+) increase 150 (+) increase 550 Sales retums and allowances Net sales (+) increase (+) increase (+) increase Cost of goods sold Gross profit Allied Merchandisers was organized on May 1. Macy Company Is a major customer (buyer) of Alled (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 $7 cash per unit (for a total cost of $7,000). May 5 Allied sold 500 of the units in inventory for $11 per unit (invoice total: $5,5ee) to Macy company under credit terms 2/10, n/60. The goods cost Allied $3,50e. May 7 Macy returns 50 units because they did not fit the customer's needs (invoice amount: $550). Allied restores the units, which cost $35e, to its inventory. May 8 Macy discovers that 5e 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 $15e to compensate for the damage. May 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. Use the above informations, analyze each transaction by Indicating Its effects on the Income statement-specifically, Identify the accounts and amounts (Including + or -) for each transaction. May 3 May 5 May 7 May 8 May 15 Income Statement Components Increase/Decrease Amount Increase/Decrease Amount Increase/Decrease Amount Increase/Decrease Amount Increase/Decrease Amount (+) increase (+) increase Sales 5,500 Sales discounts 96 (+) increase (+) increase 150 (+) increase 550 Sales retums and allowances Net sales (+) increase (+) increase (+) increase Cost of goods sold Gross profit

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