Problem 3

Required information 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 Coepany 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 custoner's needs (invoice amount: $1,400 ). Allied restores the units, which cost $1,000, to its inventory. May 8 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. May \& Macy discovers that 1 we units are scutred out are still or use and, theretore, 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 LO P2 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. zcts on the income statement-specifically, identify the