Question

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

May		11		Sydney accepts delivery of $23,500 of merchandise it purchases for resale from Troy: invoice dated May 11; terms 3/10, n/90; FOB shipping point. The goods cost Troy $15,745. Sydney pays $340 cash to Express Shipping for delivery charges on the merchandise.
		12		Sydney returns $1,400 of the $23,500 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $938.
		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

1

Prepare journal entries that Sydney Retailing (buyer) records for these three transactions.

Date	General Journal	Debit $	Credit $
11-May	Merchandise Inventory	23500
	Accounts payable		23500
11-May	Merchandise Inventory	340
	Cash		340
12-May	Accounts payable	1400
	Merchandise Inventory		1400
20-May	Accounts payable (23500-1400)	22100
	Cash (22100-663)		21437
	Merchandise Inventory (22100*3%)		663

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2.

Prepare journal entries that Troy Wholesalers (seller) records for these three transactions.

Date	General Journal	Debit $	Credit $
11-May	Accounts Recivable	23500
	Sales		23500
11-May	Cost of goods sold	15745
	Merchandise Inventory		15745
12-May	Sales returns and allowance	1400
	Accounts Recivable		1400
12-May	Merchandise Inventory	938
	Cost of goods sold		938
20-May	Cash	21437
	Sales Discount	663
	Accounts Recivable		22100