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

Use the following information for the Exercises below.

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 $11 cash per unit (for a total cost of $22,000).
            5           Allied sold 1,000 of the units in inventory for $15 per unit (invoice total: $15,000) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $11,000.
            7           Macy returns 100 units because they did not fit the customer’s needs (invoice amount: $1,500). Allied restores the units, which cost $1,100, to its inventory.
            8           Macy discovers that 100 units are scuffed but are still of use and, therefore, keeps the units. Allied sends Macy a credit memorandum for $700 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 the appropriate journal entries for Macy Co. to record each of the May transactions. Macy is a retailer that uses the gross method and a perpetual inventory system, and purchases these units for resale.
 

Explanation

May           7:           Returned unwanted merchandise. (100 units x $15) = $1,500.
May           15:           Accounts payable paid for May 5 purchase less R&A. ($15,000 – $1,500 – $700) = $12,800.
May           15:           Merchandise inventory paid for May 5 purchase less R&A. ($15,000 – $1,500 – $700) x 2% = $256.

Thank you!