Chapter 4 Exercises
Allied Merchandisers was organized on May 1. Macy Co. is a major customer (buyer) of Allied (seller)
Allied made its first and only purchase of inventory for the period on May 3 for 2,000 units at a
price of $11 cash per unit (for a total cost of $22,000).
Allied sold 1,000 of the units in inventory for $15 per unit (invoice total: $15,000) to Macy Co.
under credit terms 2/10, n/60. The goods cost Allied $11,000.
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.
Macy discovers that 100 units are scuffed but are still of use and, therefore, keeps the units.
Allied sends Macy a credit memorandum for $700 toward the original invoice amount to
compensate for the damage.
Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net
of returns, allowances, and any cash discount.
Prepare the appropriate journal entries for Macy Co. to record each of the May transactions. Macy is a
retailer that uses the gross method and a perpetual inventory system, and purchases these units for
(If no entry is required for a transaction/event, select "No journal entry required" in the first