Exercise $5-6$

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

record the following transactions for Allied assuming it uses a perpetual inventory system and the gross method.

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 $\frac{2}{10},\frac{1}{60}.$

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 gives a price reduction

$($allowance$)$ and credits Macy's accounts receivable for $$300$ 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 Exercise $5-8$ Recording purchases, purchases returns, and purchases allowances $\_$ P$1$ Refer to

Exercise $5-6$ and prepare 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; it purchases these units for resale discount.Exercise $5-8$ Recording purchases, purchases returns, and purchases allowances $P1$ gross method and a perpetual inventory system; it purchases these units for resale.