price of $$ \$ 11 $$ cash per unit (for a total cost of $$ \$ 22,000 $$ ). May 5 Allied sold 1,000 of the units in inventory for $$ \$ 15 $$ per unit (invoice total: $$ \$ 15,000 $$ ) to Macy Company under credit terms $$ 2 / 10, \mathrm{n} / 60 $$. The goods cost Allied $$ \$ 11,000 $$. May 7 Macy returns 100 units because they did not fit the customer's needs (invoice amount: \$1,500). Allied restores the units, which cost $$ \$ 1,100 $$, 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 $$ \$ 700 $$ 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 4-8 (Algo) Recording purchases, purchases returns, and purchases allowances LO P1 Prepare the appropriate journal entries for Macy Company 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. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. View transaction list Journal entry worksheet 1 2 3 4 5 Allied sold 1,000 of the units in inventory for $$ \$ 15 $$ per unit (invoice total: $$ \$ 15,000 $$ ) to Macy Company under credit terms $$ 2 / 10, n / 60 $$. The goods cost $$ \$ 11,000 $$ to Allied.

Question

UpStudy AI · Accepted Answer

1. **May 5 – Record Purchase**  
 Debit: Inventory $$ \$15{,}000 $$  
 Credit: Accounts Payable $$ \$15{,}000 $$

2. **May 7 – Record Purchase Return**  
 Debit: Accounts Payable $$ \$1{,}500 $$  
 Credit: Inventory $$ \$1{,}500 $$  
 *(Return of 100 units at \$15 per unit)*

3. **May 8 – Record Purchase Allowance**  
 Debit: Accounts Payable $$ \$700 $$  
 Credit: Inventory $$ \$700 $$  
 *(Allowance for 100 scuffed units)*

4. **May 15 – Record Payment (within discount period)**  
 Calculate the net amount due:  
 $$
\text{Net Invoice} = \$15{,}000 - \$1{,}500 - \$700 = \$12{,}800
$$  
 Calculate the cash discount (2%):  
 $$
\text{Discount} = 0.02 \times \$12{,}800 = \$256
$$  
 Calculate the cash paid:  
 $$
\text{Cash} = \$12{,}800 - \$256 = \$12{,}544
$$  
 Entry:  
 Debit: Accounts Payable $$ \$12{,}800 $$  
 Credit: Cash $$ \$12{,}544 $$  
 Credit: Inventory $$ \$256 $$  
 *(Discount taken reduces the cost of inventory)*
1. **May 5 – Purchase**  Debit: Inventory $$ \$15{,}000 $$  Credit: Accounts Payable $$ \$15{,}000 $$ 2. **May 7 – Purchase Return**  Debit: Accounts Payable $$ \$1{,}500 $$  Credit: Inventory $$ \$1{,}500 $$ 3. **May 8 – Purchase Allowance**  Debit: Accounts Payable $$ \$700 $$  Credit: Inventory $$ \$700 $$ 4. **May 15 – Payment**  Debit: Accounts Payable $$ \$12{,}800 $$  Credit: Cash $$ \$12{,}544 $$  Credit: Inventory $$ \$256 $$

Upstudy AI Solution

Answer

Solution

Bonus Knowledge

Related Questions

Latest Economics Questions