The transactions listed below are typical of those involving Amalgamated Textiles and American Fashions. Amalgamated is a wholesale merchandiser and American Fashions is a retail merchandiser. Assume all sales of merchandise from Amalgamated to American Fashions are made with terms n/60, and the two companies use perpetual inventory systems. Assume the following transactions between the two companies occurred in the order listed during the year ended December 31. Amalgamated sold merchandise to American Fashions at a selling price of $310,000. The merchandise had cost Amalgamated $207,000. Two days later, American Fashions returned goods that had been sold to the company at a price of $35,500 and complained to Amalgamated that some of the remaining merchandise differed from what American Fashions had ordered. Amalgamated agreed to give an allowance of $4,500 to American Fashions. The goods returned by American Fashions had cost Amalgamated $23,270. Just three days later, American Fashions paid Amalgamated, which settled all amounts owed.

2. Prepare the journal entries that Amalgamated Textiles would record. TIP: When using a perpetual inventory system, the seller always makes two journal entries when goods are sold. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Journal entry worksheet

Note: Enter debits before credits

• 1

  Record the sales on account of $310,000 to American Fashions on terms n/60.

• 2

  Record the cost of goods sold of $207,000.

• 3

  Record the allowance and returns of $4,500 granted to American Fashions.

• 4

  Record the cost of goods sold adjustment to inventory.

• 5

  Record the receipt of payment in full from American Fashions.