Allied Parts was organized on May 1, 2015, and made its fast purchase of merchan

Question

Allied Parts was organized on May 1, 2015, and made its fast purchase of merchandise on May 3. The purchase was tor 2.000 units at a price of $10 per unit. On May 5, Allied Parts sold 1.500 of the units tor $14 per unit to 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 Paris sends Baker a credit memorandum for $600 to compensate for the damage. On May 15. Baker discovers that 100 units are the wrong color. Baker keeps 60 of these units because Allied Parts sends a $120 credit memorandum to compensate Baker returns the remaining 40 units to Allied Parts. Allied Parts restores the 40 returned units to its inventory. Prepare the appropriate journal entries for Baker Co. to record the May 5 purchase and each of the three separate transactions. Baker is a retailer that uses a perpetual inventory system and purchases these units for resale.

Explanation / Answer

Journal Date 5-May purchases 21000 To accounts payable 21000 7-May Accounts payable 2800 To purchase returns 2800 8-May Accounts payable 600 To purchase returns and allowances 600 15-May Accounts payable 120 To purchase returns and allowances 120 Accounts payable 560 To purchase returns 560

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