Question

May		11		Sydney accepts delivery of $32,000 of merchandise it purchases for resale from Troy: invoice dated May 11; terms 3/10, n/90; FOB shipping point. The goods cost Troy $21,440. Sydney pays $495 cash to Express Shipping for delivery charges on the merchandise.
		12		Sydney returns $1,400 of the $32,000 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.

Sydney accepts delivery of $32,000 of merchandise it purchases for resale from Troy: invoice dated May 11; terms 3/10, n/90; FOB shipping point. The goods cost Troy $21,440.

Sydney pays $495 cash to Express Shipping for delivery charges on the merchandise.

Sydney returns $1,400 of the $32,000 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $938.

Sydney pays Troy for the amount owed. Troy receives the cash immediately.

Record the merchandise sold on account.

Record the cost of goods sold.

Record the sales return.

Record the cost of sales return.

Record the cash collected for credit sales.

Answer 1

Sydney Retailing(buyer)
Date	Accounting titles & Explanations				Debit	Credit
11-May	Merchandise inventory				32,000
	Accounts payable					32,000
	Merchandise inventory				495
	cash					495
12-May	Accounts payable				1,400
	Merchandise inventory					1,400
20-May	Accounts payable		(32000-1400)		30600
	Merchandise invnetory					918
	Cash	(30600*97%)				29682
Troy wholesalers (seller)
Date	Accounting titles & Explanations				Debit	Credit
11-May	Accounts receivable				32,000
	sales					32,000
	cost of goods sold				21,440
	Merchandise inventory					21,440
12-May	Sales return & allowance				1,400
	Accounts receivabl					1,400
	merchandise inventory				938
	cost of goods sold					938
20-May	Cash				29682
	Sales discount				918
	account receivable					30,600