Question
upstudy study bank question image url

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.

Ask by Bolton Burgess. in the United States
Mar 10,2025

Upstudy AI Solution

Tutor-Verified Answer

Answer

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 \( \$256 \)

Solution

Sign in to Unlock Answers for Free!

A Learning Platform Trusted by Millions of Real Students and Teachers.

star-icon Unlock

Answered by UpStudy AI and reviewed by a Professional Tutor

Bonus Knowledge

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.

Related Questions

Latest Economics Questions

Try Premium now!
Try Premium and ask Thoth AI unlimited math questions now!
Maybe later Go Premium
Study can be a real struggle
Why not UpStudy it?
Select your plan below
Premium

You can enjoy

Start now
  • Step-by-step explanations
  • 24/7 expert live tutors
  • Unlimited number of questions
  • No interruptions
  • Full access to Answer and Solution
  • Full Access to PDF Chat, UpStudy Chat, Browsing Chat
Basic

Totally free but limited

  • Limited Solution
Welcome to UpStudy!
Please sign in to continue the Thoth AI Chat journey
Continue with Email
Or continue with
By clicking “Sign in”, you agree to our Terms of Use & Privacy Policy