The transactions listed below are typical of those involving

Amalgamated #2734
The transactions listed below are typical of those involving Amalgamated Textiles and American
Fashions. Amalgamated is a wholesale merchandiser and American Fashions is a retail
merchandiser. Assume all sales of merchandise from Amalgamated to American Fashions are
made with terms 2/10, n/30, and that the two companies use perpetual inventory systems.
Assume the following transactions between the two companies occurred in the order listed
during the year ended December 31, 2013.a. Amalgamated sold merchandise to American
Fashions at a selling price of $230,000. The merchandise had cost Amalgamated $175,000.b.
Two days later, American Fashions complained to Amalgamated that some of the merchandise
differed from what American Fashions had ordered. Amalgamated agreed to give an allowance
of $5,000 to American Fashions.c. Just three days later, American Fashions paid Amalgamated,
which settled all amounts owed.Required:1. For each of the events (a) through (c), indicate the
amount and direction of the effect (+ for increase, - for decrease, and NE for no effect) on
Amalgamated Textiles in terms of the following items.2. Which of the above items are likely to
be reported on Amalgamated's external financial statements, and which items will be combined
"behind the scenes"?3. Prepare the journal entries that Amalgamated Textiles would record,
and show any computations.View Solution:
The transactions listed below are typical of those involving Amalgamated

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