Ch 04 ex 4-6,7,8

Use the following information for the Exercises below.

[The following information applies to the questions displayed below.]

Allied Merchandisers was organized on May 1. Macy Company 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).

May 5 Allied sold 1,000 of the units in inventory for $14 per unit (invoice total: $14,000 to Macy Company under credit terms 2/10, n/60. The goods cost Allied

$10.000.

May 7 Macy returns 100 units because they did not fit the customer's needs (invoice amount: $1,400. Allied restores the units, which cost $1,000, to its

inventory.

May & Macy discovers that 100 units are scuffed but are still of use and, therefore, keeps the units. Allied gives a price reduction (allowance) and credits Macy's

accounts receivable for $600 to compensate for the damage.

May 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.

Exercise 4-7 (Algo) Effects of sales transactions on income statement LOP2 Use the above informations, analyze each transaction by indicating its effects on the income statement-specifically, identify the accounts and amounts (including + or -) for each transaction. Amount Increase/Decrease Amount Exercise 4-8 (Algo) Recording purchases, purchases returns, and purchases allowances LO P1 Prepare the appropriate journal entries for Macy Company to record each of the May transactions. Macy is a retailer that uses the gross method and a perpetual inventory system; it purchases these units for resale. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first occount field. Journal entry worksheet 5 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 ). Noter Enter debits beforcredits