Required information [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 1,500 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 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. Prepare journal entries to record the following transactions for Allied assuming it uses a perpetual inventory system and the gross method. No 1 Date May 03 General Journal Merchandise inventory Cash 2 May 05 Accounts receivable Sales 00 Debit Credit 20,000 20,000 21,000 21,000 3 May 05 Cost of goods sold O 15,000 Merchandise inventory 0 15,000 4 May 07 Sales returns and allowances Accounts receivable 1,750 1,750 5 May 07 Merchandise inventory C 1,250 2 May 05 Cash Accounts receivable Sales 20,000 21,000 21,000 3 May 05 Cost of goods sold Merchandise inventory 15,000 15,000 4 May 07 Sales returns and allowances 1,750 Accounts receivable 1,750 5 May 07 Merchandise inventory Cost of goods sold 6 May 08 Purchases returns and allowances Accounts receivable 1,250 1,250 * S 300 300 7 May 15 Cash Accounts receivable *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted 18,950 * 18,950