Question

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

May		11		Sydney accepts delivery of $45,000 of merchandise it purchases for resale from Troy: invoice dated May 11, terms 3/10, n/90, FOB shipping point. The goods cost Troy $33,000. Sydney pays $380 cash to Express Shipping for delivery charges on the merchandise.
May		12		Sydney returns $1,800 of the $45,000 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $1,320.
May		20		Sydney pays Troy for the amount owed. Troy receives the cash immediately.

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

1. Prepare journal entries that Sydney Retailing records for these transactions.

2. Prepare journal entries that Troy Wholesalers records for these transactions.

Answer 1

Solution 1:

Journal Entries - Sydney Retailing
Date	Particulars	Debit	Credit
11-May	Merchandise Inventory Dr	$45,000.00
	To Accounts payable		$45,000.00
	(To record purchase of inventory on account)
11-May	Merchandise Inventory Dr	$380.00
	To Cash		$380.00
	(To record frieght payment)
12-May	Accounts payable Dr	$1,800.00
	To Inventory		$1,800.00
	(To record purchase returns)
20-May	Accounts payable Dr	$43,200.00
	To Cash		$41,904.00
	To Inventory		$1,296.00
	(To record payment to supplier)

Solution 2:

Journal Entries - Troy Wholesalers
Event	Particulars	Debit	Credit
11-May	Accounts receivables - Sydney Retailing Dr	$45,000.00
	To Sales revenue		$45,000.00
	(To record sales on account)
11-May	Cost of goods sold Dr	$33,000.00
	To Merchandise Inventory		$33,000.00
	(To record cost of goods sold)
12-May	Sales returns and allowances Dr	$1,800.00
	To Accounts receivables - Sydney Retailing		$1,800.00
	(To record sales return)
12-May	Merchandise inventory Dr	$1,320.00
	To Cost of goods sold		$1,320.00
	(Being goods returned taken into inventory)
20-May	Cash Dr	$41,904.00
	Sales discount Dr	$1,296.00
	To Accounts receivables - Macy		$43,200.00
	(To record collection from customer)