Allied Merchandisers was organized on May 1. Macy Co. is a majorcustomer (buyer) of Allied (seller) products.
| May | | 3 | | Allied made its first and onlypurchase of inventory for the period on May 3 for 3,000 units at aprice of $8 cash per unit (for a total cost of $24,000). |
| | 5 | | Allied sold 1,500 of the units ininventory for $12 per unit (invoice total: $18,000) to Macy Co.under credit terms 2/10, n/60. The goods cost $12,000 toAllied. |
| | 7 | | Macy returns 150 units because theydid not fit the customer’s needs (invoice amount: $1,800). Alliedrestores the units, which cost $1,200, to its inventory. |
| | 8 | | Macy discovers that 150 units arescuffed but are still of use and, therefore, keeps the units.Allied sends Macy a credit memorandum for $600 toward the originalinvoice amount to compensate for the damage. |
| | 15 | | Allied receives payment from Macy for the amount owed on the May5 purchase; payment is net of returns, allowances, and any cashdiscount. |
Prepare journal entries to record the following transactions forAllied assuming it uses a perpetual inventory system and the grossmethod. (Allied estimates returns using an adjusting entry at eachyear-end.)
