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Allied Merchandisers was organized on May 1. Macy Co. 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).
5 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 Allied $15,000.
7 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.
8 Macy discovers that 200 units are scuffed but are still of use and, therefore, keeps the units. Allied sends Macy a credit memorandum for $300 toward the original invoice amount to compensate for the damage.
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.

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Allied Merchandisers was organized on May 1. Macy Co. is a major customer (buyer) of Allied (seller) products.

What would be the journal entries for Allied assuming it uses a perpetual inventory system?

Date Particular                            Debit                  Credit

May 3 Merchandise Inventory         $16,000

                  To Accounts Payable                                 $16,000

May 5 Accounts Receivable         $12,000

                  To Sales Revenue                                 $12,000

May 5 Cost of goods sold         $8,000

                 To Merchandise Inventory                                $8,000

May 7 Sales Revenue                  $1,200

                  To Accounts Receivable                         $1,200

May 7 Merchandise Inventory             $800

                  To Cost of goods sold (100 *$ 8)           $800

May 8 Sales allowances                      $400

                   To Accounts receivable                           $ 400

May 15   Cash                                      $10,192

                   To Sales discounts ($10400*2%)                  $208

                   To Accounts receivable                                     $10,400

What do you mean by journal entries?

All company transactions are documented in journal entries. Any financial activity that has an effect on the firm is a transaction, in the broadest sense. They encompass every transaction involving the exchange of money, including interest payments, depreciation, costs, and payroll. They are not just restricted to the purchasing and selling of goods and services.

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