Question

Sydney Retailing (buyer) and Troy Wholesalers (seller) enter into the following transactions.
  

May		11		Sydney accepts delivery of $37,500 of merchandise it purchases for resale from Troy: invoice dated May 11; terms 3/10, n/90; FOB shipping point. The goods cost Troy $25,125. Sydney pays $510 cash to Express Shipping for delivery charges on the merchandise.
		12		Sydney returns $1,500 of the $37,500 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $1,005.
		20		Sydney pays Troy for the amount owed. Troy receives the cash immediately.

(Both Sydney and Troy use a perpetual inventory system and the gross method.)

1. Prepare journal entries that Sydney Retailing (buyer) records for these three transactions.
2. Prepare journal entries that Troy Wholesalers (seller) records for these three transactions.

Answer 1

Journal entries in books of Sydney (Buyer)
Date	Accounts title and explanation	Dr($)	Cr($)
May 11	Inventory	$        37,500
	Accounts payable		$        37,500
	(To record the purchase of goods on account from Troy with 3/10, n30)
May 11	Inventory	$              510
	Cash		$              510
	(To record the payment of shipping charges )
May 12	Accounts payable	$          1,500
	Merchandise inventory		$          1,500
	(To record the return of Goods)
May 20	Accounts payable (37500-1500)	$        36,000
	Inventory(36000 x 3%)		$          1,080
	Cash (Bal. Fig.)		$        34,920
	(To record the final payment to Troy after discount)
Journal entries in books of Troy(Seller)
Date	Accounts title and explanation	Dr($)	Cr($)
May 11	Accounts Receivable	$        37,500
	Sales		$        37,500
	(To record the sales of goods on account To Sydney with 3/10, n30)
May 11	Cost of goods sold	$        25,125
	Inventory		$        25,125
	(To record the cost of sales )
May 12	Sales returns and allowances	$          1,500
	Accounts Receivable		$          1,500
	(To record the return of Goods)
May 12	Inventory	$          1,005
	Cost of goods sold		$          1,005
	(To record the inventory returned back)
May 20	Cash	$        34,920
	sales Discounts	$          1,080
	Accounts Receivable		$        36,000
	(To record the final receipt from sydney after discount)