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 1,500 of the units in inventory for $14 per unit (invoice total: $21,000) to Macy Company under credit terms 2/10, n/60. The goods cost Allied $15,000.

May 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.

May 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.

May 15Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns, allowances, and any cash discount.

Use the above informations, analyze each transaction by indicating its effects on the income statementspecifically, identify the accounts and amounts (including + or -) for each transaction.

Income Statement ComponentsMay 3 May 5 May 7 May 8 May 15

Increase/Decrease Amount Increase/Decrease Amount Increase/Decrease Amount Increase/Decrease Amount Increase/Decrease Amount

Sales

Sales discounts

Sales returns and allowances

Net sales

Cost of goods sold

Gross profit