Question

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

May		11		Sydney accepts delivery of $40,000 of merchandise it purchases for resale from Troy: invoice dated May 11; terms 3/10, n/90; FOB shipping point. The goods cost Troy $30,000. Sydney pays $345 cash to Express Shipping for delivery charges on the merchandise.
		12		Sydney returns $1,400 of the $40,000 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $1,050.
		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
sydney retailing
Date	Particulars			Debit	credit
11-May	merchandise inventory			$ 40,000.00
	accounts payable				$ 40,000.00
	( to record the purchase)
11-May	merchandise inventory			$       345.00
	cash				$       345.00
	(to record the payment shipping charges)
12-May	accounts payable			$   1,400.00
	merchandise inventory				$   1,400.00
	(to record goods returned)
20-May	accounts payable (40000-1400)			$ 38,600.00
	merchandise inventory (40000-1400)*3%				$   1,158.00
	cash				$ 37,442.00
	( to record payment)
Journal entries
Troy wholeseller
Date	Particulars			Debit	Credit
11-May	accounts receivable			$ 40,000.00
	sale				$ 40,000.00
	( to recoed goods sold)
11-May	cost of goods sold			$ 30,000.00
	merchandise inventory				$ 30,000.00
	(to record cost of sale)
12-May	sales return & allowance			$   1,400.00
	accounts receivable				$   1,400.00
	(to record the sale return)
12-May	merchandise inventory			$   1,050.00
	cost of goods sold				$   1,050.00
	( to record the return goods to inventory)
20-May	Cash			$ 37,442.00
	sale discount (40000-1400)*3%			$   1,158.00
	accounts receivable (40000-1400)				$ 38,600.00
	(to record the cash received )