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 totals $21,000) to Hacy Co. under credit terms 2/10, n/60. The goods cost Allied $15,000. 7 Kacy 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. Macy discovers that 200 units are scuffed but are atili of use and, therefore, keeps the units. Allied sende 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 oved on the May 3 purchase; payment is net of returns, allowances, and any cash discount. Exercise 4-4 Recording sales, sales returns, and sales allowances LO P2 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.) View transaction list View journal entry worksheet \ No 1 Date May 03 General Journal Merchandise inventory Cash 2 May 05 Accounts receivable Sales 3 May 05 Cost of goods sold Merchandise inventory Debit Credit 20,000 20,000 21,000 21,000 Prev 1 2 of 7 Next >