2. Exercise 4-4 Recording sales returns and allowances LO P2 Allied Parts was or

Question

2. Exercise 4-4 Recording sales returns and allowances LO P2 Allied Parts was organized on May 1, 2013, and made its first purchase of merchandise on May 3. The purchase was for 1,900 units at a price of $12 per unit. On May 5, Allied Parts sold 1,140 of the units for $16 per unit to Baker Co. Terms of the sale were 2/10, n/60. On May 7, Baker returns 399 units because they did not fit the customer's needs. Allied Parts restores the units to its inventory. a. b. On May 8, Baker discovers that 95 units are damaged but are still of some use and, therefore, keeps the units. Allied Parts sends Baker a credit memorandum for $760 to compensate for the damage. On May 15, Baker discovers that 114 units are the wrong color. Baker keeps 68 of these units because Allied Parts sends a $134 credit memorandum to compensate. Baker returns the remaining 46 units to Allied Parts. Allied Parts restores the 46 returned units to its inventory. c. Prepare entries for Allied Parts to record the May 5 sale and each of the following separate transactionsa through c using a perpetual inventory system

Explanation / Answer

Journal Entries:

Date Account Title Debit Credit May 5 Account Receivable 18,240 Sales 18,240 May 5 Cost of Goods sold 13,680 Inventory 13,680 May 7 Sales Return and allowance 6,384 Account Receivable 6,384 May 7 Inventory 4,788 Cost of Goods sold 4,788 May 8 Sales Discount 760 Account Receivables 760 May 15 Sales Discount 134 Account Receivable 134 May 15 Sales return and allowance 736 Account Receivable 736 May 15 Inventory 552 Cost of Goods sold 552

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