Allied parts was organized on May 1, 2013 and made its first purchase of merchan

Question

Allied parts was organized on May 1, 2013 and made its first purchase of merchandise on may3.The purchase was for 1,500 units at a price of $11 per unit. On may 5, Allied parts sold 900 of the units for $15 per unit to baker co.Terms of the sale were 2/10,n/60. a.On may 7, baker roturns 315 units beause they did not fit customer's needs.Allied parts restores the units to its invenory, b,On may 8, Baker discovers that 75 units are damaged but are still of some use and, therefore,keeps the units.Allied parts sends baker a credit memorandum for $525 to compensate for the damage. c.On may 15, baker discovers that 90 units are the wrong color. baker keeps 54 of these units because allied parts sends a $110 credit memorandum to compensate.Baker returns the remaining 36 units to Allied parts.Allied parts restores the 36 refurned units to its inventory.

Explanation / Answer

Working

May 15: Accepted a return from a customer [$110 + (36 * $15)] = $650

Returned merchandise to inventory (36 * $11) = $396

Journal Date Particulars Debit Credit May 05 Dr. Accounts receivable $13,500 Cr. Sales $13,500 May 05 Dr. Cost of goods sold $9,900 Cr. Merchandise inventory $9,900 May 07 Dr. Sales returns and allowances $4,725 Cr Accounts receivable $4,725 May 07 Dr. Merchandise inventory $3,465 Cr. Cost of goods sold $3,465 May 08 Dr. Sales returns and allowances $525 Cr. Accounts receivable $525 May 15 Dr. Sales returns and allowances $650 Cr. Accounts receivable $650 May 15 Dr. Merchandise inventory $396 Cr. Cost of goods sold $396

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