Allied Part was organized on May 1 2015 and made its first purchase of merchandi

Question

Allied Part was organized on May 1 2015 and made its first purchase of merchandise on May 3 The purchase was for 2 000 units at a price of dollar 10 per unit On May 5 Allied Parts sold 1 500 of the units for dollar 14 per unit lo Baker Co Terms of the sale were 2/10 n/60. On May 7. Baker returns 200 units because they did not fit the customer's needs Allied Parts restores the units to its inventory On May 8 Baker discovers that 300 units are damaged but are still of some use and therefore keeps the units Allied Parts sends Baker a credit memorandum for dollar 600 lo compensate for the damage c On May 15 Baker discovers that 100 units are the wrong color Baker keeps 60 of these units because Allied Parts sends a dollar120 credit memorandum to compensate Baker returns the remaining 40 units lo Allied Parts Allied Parts restores the 40 returned units to Ms inventory Prepare the appropriate journal entries for Baker Co to record the May 5 purchase and each of the three separate

Explanation / Answer

Solution:

Journal Entries in thebooks of Baker Co.

Merchandise Inventory

Date Accounts Title Debit ($) Credit ($) May 5

Merchandise Inventory

21000 Accounts Payable - Allied Parts 21000 (being goods purchased for resale) May 7 Accounts Payable - Allied Parts [200*14] 2800 Merchandise Inventory 2800 (being goods purchased returned to vendor) May 8 Accounts Payable - Allied Parts 600 Merchandise Inventory 600 (being credit memo received from vendor) May 15 Accounts Payable - Allied Parts 120 Merchandise Inventory 120 (being credit memo received from vendor) Accounts Payable - Allied Parts [40*14] 560 Merchandise Inventory 560 (being goods purchased returned to vendor)

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