[The following information applies to the questions displayed below.] Allied Merchandisers was organized on May 1. Macy Company is a major customer (buyer) of Allied (seller) products. May 3Allied made its first and only purchase of inventory for the period on May 3 for 3,000 units at a price of $9 cash per unit (for a total cost of $27,000).May 5Allied sold 1,500 of the units in inventory for $13 per unit (invoice total: $19,500) to Macy Company under credit terms 2/10, n/60. The goods cost Allied $13,500.May 7Macy returns 150 units because they did not fit the customer’s needs (invoice amount: $1,950). Allied restores the units, which cost $1,350, to its inventory.May 8Macy discovers that 150 units are scuffed but are still of use and, therefore, keeps the units. Allied gives a price reduction (allowance) and credits Macy's accounts receivable for $750 to compensate for the damage.May 15Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns, allowances, and any cash discount. Use the above informations, analyze each transaction by indicating its effects on the income statement—specifically, identify the accounts and amounts (including + or -) for each transaction. May 8Increase/DecreaseAmountMay 15Increase/DecreaseAmount Income Statement ComponentsSalesSales discountsSales returns and allowancesNet salesCost of goods soldGross profitMay 3Increase/Decrease AmountMay 5Increase/DecreaseAmountMay 7Increase/DecreaseAmount

Gross Profit The money a business makes after deducting all of the expenses related to producing and…

Answered: Allied Merchandisers was organized on…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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[The following information applies to the questions displayed below.]

Allied Merchandisers was organized on May 1. Macy Company is a major customer (buyer) of Allied (seller) products.

May 3	Allied made its first and only purchase of inventory for the period on May 3 for 3,000 units at a price of $9 cash per unit (for a total cost of $27,000).
May 5	Allied sold 1,500 of the units in inventory for $13 per unit (invoice total: $19,500) to Macy Company under credit terms 2/10, n/60. The goods cost Allied $13,500.
May 7	Macy returns 150 units because they did not fit the customer’s needs (invoice amount: $1,950). Allied restores the units, which cost $1,350, to its inventory.
May 8	Macy discovers that 150 units are scuffed but are still of use and, therefore, keeps the units. Allied gives a price reduction (allowance) and credits Macy's accounts receivable for $750 to compensate for the damage.
May 15	Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns, allowances, and any cash discount.

Use the above informations, analyze each transaction by indicating its effects on the income statement—specifically, identify the accounts and amounts (including + or -) for each transaction.

May 8
Increase/Decrease
Amount
May 15
Increase/Decrease
Amount

Income Statement Components
Sales
Sales discounts
Sales returns and allowances
Net sales
Cost of goods sold
Gross profit
May 3
Increase/Decrease Amount
May 5
Increase/Decrease
Amount
May 7
Increase/Decrease
Amount

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