Chapter 5 Accounting for merchandising operations

Macy returns 125 units because they did not fit the customer's needs (invoice amount: $1,750).

Sales returned and allowed $1750 A/Rec $1750

Sydney returns $1,400 of the $40,000 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $1,050.

A/Pay $1400 Merchandise Inventory $1400

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.

A/Pay $1750 Merchandise Inventory $1750

EX 3 Prepare journal entries to record the following transactions for Allied assuming it uses a perpetual inventory system and the gross method. (Allied estimates returns using an adjusting entry at each year-end.) 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).

A/Pay $20000 Cash $20000

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.

A/Pay $21000 Sales $21000

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.

A/Pay $300 Merchandise Inventory $300

Sydney pays Troy for the amount owed. Troy receives the cash immediately.

A/Pay $38600 cr Merchandise Inventory $1158 cr Cash $37442

Returned to Lyon Company unacceptable merchandise that had an invoice price of $600.

A/Pay $600 Merchandise Inventory $600

Sent check to Frist paying for the April 18 purchase, net of the allowance and the discount

A/Pay First $8000 Merchandise Inventory $80 Cash $7920

After negotiations, received from Frist a $500 allowance toward the $8,500 owed on the April 18 purchase.

A/Pay Frist $500 Merchandise Inventory $500

Sent a check to Lyon Company for the April 2 purchase, net of the discount and the returned merchandise.

A/Pay Lyon $ 4000 Merchandise Inventory $80 Cash $3920

Record the merchandise sold on account.

A/Rec $40000 Sales $40000

Record the cost of goods sold.

Cost of goods sold $15000 Merchandise Inventory $15000

Record the cost of goods sold.

Cost of goods sold $30000 Merchandise inventory $30000

Record the cost of sales return.

Merchandise Inventory $1050 Cost of goods sold $1050

Allied restores the units, which cost $1,250, to its inventory.

Merchandise Inventory $1250 Cost of goods sold $1250

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.

Merchandise Inventory $21000 A/Pay $21000

Sydney pays $345 cash to Express Shipping for delivery charges on the merchandise.

Merchandise Inventory $345 Cash $345

EX 5 Prepare journal entries that Sydney Retailing (buyer) records for these three transactions. Sydney accepts delivery of $40,000 of merchandise it purchases for resale from Troy: invoice dated May 11; terms 3/10, n/90; FOB shipping point. The goods cost Troy $30,000.

Merchandise Inventory $40000 A/Pay $40000

Purchased $8,500 of merchandise from Frist Corp. with credit terms of 1/10, n/30, invoice dated April 18, and FOB destination.

Merchandise Inventory $8500 A/Pay Frist $8500

Paid $300 cash for shipping charges on the April 2 purchase.

Merchandise inventory $300 Cash $300

Purchased $4,600 of merchandise from Lyon Company with credit terms of 2/15, n/60, invoice dated April 2, and FOB shipping point.

Merchandise inventory $4600 A/Pay $4600

EX 4 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 resale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 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).

No journal entry required

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.

Sales returns and allowed $300 A/Rec $300

Record the sales return.

Sales returns and allows $1400 A/Rec $1400

Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns, allowances, and any cash discount.

dr A/Pay $18950 cr Cash $18571 cr Merchandise Inventory $379

Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns, allowances, and any cash discount.

dr Cash $18571 dr Sales discount $379 cr A/Rec $18950 (21000-1750-300)

Record the cash collected for credit sales.

dr Cash $37442 dr Sales discount $1158 cr A/Rec $38600