Use the information in CP6-1 to complete the following requirements.

Info CP6-1

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 (1 for increase, 2 for decrease, and NE for no effect) on Amalgamated Textiles in terms of the following items.

Use the information in CP6-1 to complete the following requirements.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.