Allied merchandisers was organized on may 1. macy co. 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 $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. 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.)