Allied Merchandisers was organized on May 1. Macy Co. is a major customer (buyer) of Allied (seller) products. 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.)
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 \(10 cash per unit (for a total cost of \)20,000).
5 Allied sold 1,500 of the units in inventory for \(14 per unit (invoice total: \)21,000) to Macy Co. under credit terms 2∕10, n∕60. The goods cost Allied \(15,000.
7 Macy returns 125 units because they did not fit the customer’s needs (invoice amount: \)1,750). Allied restores the units, which cost \(1,250, to its inventory.
8 Macy discovers that 200 units are scuffed but are still of use and, therefore, keeps the units. Allied sends Macy a credit memorandum for \)300 toward the original invoice amount to compensate for the damage.
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.
