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.
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On May 5, Macy Company would record the purchase of goods with an entry that reflects the total invoice amount. The entry would be: **Debit Inventory** \( \$ 15,000 \) **Credit Accounts Payable** \( \$ 15,000 \) This records the purchase of 1,000 units at $15 each, showing an increase in inventory while indicating that the company owes this amount. On May 7, when Macy returns 100 units, the entry would be: **Debit Accounts Payable** \( \$ 1,500 \) **Credit Inventory** \( \$ 1,500 \) This reflects the reduction in both the liability and the inventory, as Macy no longer has those units available for resale. For the May 8 allowance transaction, Macy would record: **Debit Accounts Payable** \( \$ 700 \) **Credit Inventory** \( \$ 700 \) This acknowledges the price reduction granted to Macy for the 100 scuffed units, adjusting inventory value downwards. Finally, on May 15, Macy makes the payment to Allied. The total amount owed after considering the return and allowance (i.e., \( \$ 15,000 - \$ 1,500 - \$ 700 = \$ 12,800 \)). The entry would be: **Debit Accounts Payable** \( \$ 12,800 \) **Credit Cash** \( \$ 12,800 \) This reflects the payment made to Allied after the adjustments.
