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

 

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Allied Merchandisers was organized on May 1. Macy Company 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 $7 cash per unit (for a total cost of $14,000). May 5 Allied sold 1,000 of the units in inventory for $11 per unit (invoice total: $11,000) to Macy Company under credit terms 2/10, n/60. The goods cost Allied $7,000. May 7 Macy returns 100 units because they did not fit the customer's needs (invoice amount: $1,100). Allied restores the units, which cost $700, to its inventory. May 8 Macy discovers that 100 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 $300 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. Exercise 4-7 (Algo) Effects of sales transactions on income statement LO P2 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 Income Statement Components May 8 May 15 Increase/Decrease Amount Increase/Decrease Amount Increase/Decrease Amount Increase/Decrease Amount Increase/Decrease Amount Sales (-) decrease Sales discounts (-) decrease Sales returns and allowances (-) decrease Net sales (-) decrease Cost of goods sold Gross profit (-) decrease (-) decrease Allied Merchandisers was organized on May 1. Macy Company 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 $7 cash per unit (for a total cost of $14,000). May 5 Allied sold 1,000 of the units in inventory for $11 per unit (invoice total: $11,000) to Macy Company under credit terms 2/10, n/60. The goods cost Allied $7,000. May 7 Macy returns 100 units because they did not fit the customer's needs (invoice amount: $1,100). Allied restores the units, which cost $700, to its inventory. May 8 Macy discovers that 100 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 $300 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. Exercise 4-7 (Algo) Effects of sales transactions on income statement LO P2 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 Income Statement Components May 8 May 15 Increase/Decrease Amount Increase/Decrease Amount Increase/Decrease Amount Increase/Decrease Amount Increase/Decrease Amount Sales (-) decrease Sales discounts (-) decrease Sales returns and allowances (-) decrease Net sales (-) decrease Cost of goods sold Gross profit (-) decrease (-) decrease

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To determine the effects of each transaction on the income statement components Sales Sales Discount... View the full answer