Question

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

May		11		Sydney accepts delivery of $29,500 of merchandise it purchases for resale from Troy: invoice dated May 11, terms 3/10, n/90, FOB shipping point. The goods cost Troy $19,765. Sydney pays $680 cash to Express Shipping for delivery charges on the merchandise.
		12		Sydney returns $1,400 of the $29,500 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	Date	General Journal	Debit	Credit
	May 11	Merchandise Inventory	$29,500
		Accounts Payable		$29,500
	May 11	Merchandise Inventory	$680
		Cash		$680
	May 11	Accounts Payable	$1,400
		Merchandise Inventory		$1,400
	May 11	Accounts Payable	$28,100
		Cash		$27,257
		Merchandise Inventory		$843
2	Date	General Journal	Debit	Credit
	May 11	Accounts Receivable	$29,500
		Sales		$29,500
	May 11	Cost of Goods Sold	$19,765
		Merchandise Inventory		$19,765
	May 11	Sales returns and allowances	$1,400
		Accounts Receivable		$1,400
	May 11	Merchandise Inventory	$938
		Cost of Goods Sold		$938
	Dec 31	Cash	$27,257
		Sales Discounts	$843
		Accounts Receivable		$28,100