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. 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 7 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. Exercise 4-7 (Static) Effects of sales transactions on income statement LO P2 Exercise 4-7 (Static) Effects of sales transactions on income statement LO P2 Use the above informations, analyze each transaction by indicating its effects on the income statement-specifically, identify the accounts and amounts (including + or -) for each transaction. May 3 Income Statement Components Sales Sales discounts Sales returns and allowances Net sales Cost of goods sold Gross profit Increase/Decrease Amount May 5 Increase/Decrease (+) increase (-) decrease Amount May 7 Increase/Decrease Amount May 8 Increase/Decrease Amount May 15 Increase/Decrease Amount Journal entry worksheet < 1 2 Date May 03 3 Note: Enter debits before credits. 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). Record entry 4 5 General Journal Clear entry Debit Credit View general journal > Journal entry worksheet < 1 Note: Enter det Date May 05 2 Record entry 3 Allied sold 1,500 of the units in inventory for $14 per unit (invoice total: $21,000) to Macy Co. under credit terms 2/10, n/60. The goods cost $15,000 to Allied. 4 5 No journal entry required Accounts payable Accounts receivable Accumulated depreciation Clear entry Debit Credit View general journal Journal entry worksheet 1 2 < 3 Note: Enter debits before credits. Date May 07 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. Record entry 4 5 General Journal Clear entry Debit Credit View general journal Journal entry worksheet 1 2 3 < Note: Enter debits before credits. 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. Date May 08 4 Record entry 5 General Journal Clear entry Debit Credit View general journal Journal entry worksheet 1 2 3 4 < Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns, allowances, and any cash discount. Note: Enter debits before credits. Date May 15 5 Record entry General Journal Clear entry Debit Credit View general journal
