Question

Sydney Retailing (buyer) and Troy Wholesalers (seller) enter into the following transactions. May 11 Sydney accepts delivery of $35,000 of merchandise it purchases for resale from Troy: invoice dated May 11, terms 3/10, n/90, FOB shipping point. The goods cost Troy $23,450. Sydney pays $525 cash to Express Shipping for delivery charges on the merchandise. 12 Sydney returns $1,200 of the $35,000 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $804. 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare journal entries that Sydney Retailing (buyer) records for these three transactions.

Answer 1

1) Journal entry

No	General journal	Debit	Credit
May 11	Merchandise inventory	35000
	Account payable		35000
	Merchandise inventory	525
	Cash		525
May 12	Account payable	1200
	Merchandise inventory		1200
May 20	Account payable (35000-1200)	33800
	cash (33800*97%)		32786
	Merchandise inventory		1014

Journal entry (Seller)

Date	account and explanation	Debit	Credit
May 11	Account receivable	35000
	Sales revenue		35000
	Cost of goods sold	23450
	Merchandise inventory		23450
May 12	Sales return and allowance	1200
	Account receivable		1200
	Merchandise inventory	804
	Cost of goods sold		804
May 20	Cash (33800*97%)	32786
	Sales discount	1014
	Account receivable		33800