Allied Parts was organized on May 1, 2013, and made its first purchase of mercha

Question

Allied Parts was organized on May 1, 2013, and made its first purchase of merchandise on May 3 The purchase was for 1,700 units at a price of $10 per unit On May 5. Allied Parts sold 1,020 of the units for $14 per unit to Baker Co Terms of the sale wore 2/10, n/60. On May 7, Baker returns 357 units because they did not fit the customer's needs. Allied Parts restores the units to its inventory. On May 8, Baker discovers that 85 units are damaged but me still of some use and, therefore, keeps the units Allied Parts sends Baker a credit memorandum for $510 to compensate for the damage. On May 15, Baker discovers that 102 units are the wrong color Baker keeps 61 of these units because Allied Parts sends a $122 credit memorandum to compensate Baker returns the remaining 41 units to Allied Parts Allied Parts restores the 41 returned units to its inventory Prepare entries for Allied Parts to rocord the May 5 sale and each of the following separate transactions a through c using a perpetual inventory system and purchases these units for resale.

Explanation / Answer

Answer

Prepare appropriate journal Entries for Baker Co.

May 5

Inventory A/c Dr. $ 15300 (1020*15)

                                To Accounts payable (Allied parts) Cr. $ 15300

May 7

Accounts Payable (Allied parts) Dr. $ 5355     (357*15)

           To Inventory A/c Cr. $ 5355

May 8

Accounts Payable (Allied parts) Dr. $ 595

                        To Compensation for damages A/c Cr. $ 595

May 15

Accounts Payable (Allied parts) Dr. $ 122

                        To Compensation for damages A/c Cr. $ 122

Accounts Payable (Allied parts) Dr. $ 615     (41*15)

                                  To Inventory A/c Cr. $ 615

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