Question

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

May		11		Sydney accepts delivery of $34,000 of merchandise it purchases for resale from Troy: invoice dated May 11, terms 3/10, n/90, FOB shipping point. The goods cost Troy $22,780. Sydney pays $615 cash to Express Shipping for delivery charges on the merchandise.
		12		Sydney returns $1,500 of the $34,000 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

Solution 1:

Sydney Retailing
Journal Entries
Date	Particulars	Debit	Credit
11-May	Inventory Dr	$34,615.00
	To Accounts payable - Troy		$34,000.00
	To Cash		$615.00
	(To record inventory purchase on account and freight payment)
12-May	Accounts payable - Troy Dr	$1,500.00
	To Inventory		$1,500.00
	(To record purchase return)
20-May	Accounts payable - Troy Dr	$32,500.00
	To Inventory		$975.00
	To Cash		$31,525.00
	(To record payment)

Solution 2:

Journal Entries - Troy
Date	Particulars	Debit	Credit
11-May	Accounts receivables - Sydney Retailing Dr	$34,000.00
	To Sales revenue		$34,000.00
	(To record sales on account)
11-May	Cost of goods sold Dr	$22,780.00
	To Inventory		$22,780.00
	(To record COGS)
12-May	Sales returns and allowances Dr	$1,500.00
	To Accounts receivables - Sydney Retailing		$1,500.00
	(To record sales allowance)
12-May	Inventory Dr	$1,005.00
	To Cost of goods sold		$1,005.00
	(Being returned inventory taken in stock)
20-May	Cash Dr	$31,525.00
	Sales discount Dr	$975.00
	To Accounts receivables - Sydney Retailing		$32,500.00
	(To record collection from customer)