Question

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

May		11		Sydney accepts delivery of $31,500 of merchandise it purchases for resale from Troy: invoice dated May 11, terms 3/10, n/90, FOB shipping point. The goods cost Troy $21,105. Sydney pays $510 cash to Express Shipping for delivery charges on the merchandise.
		12		Sydney returns $1,300 of the $31,500 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $871.
		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.

Note: Enter debits before credits.

	Date General Journal Debit Credit May 11

This is for each question

Answer 1

1) In the books of Sydney Retailing (buyer)
Date	General Journal	Debit	Credit
May 11.	Merchandise Inventory	$31,500
	Accounts Payable - Troy Wholesalers		$31,500
	(To record the purchase of merchandise on account)
May 11.	Merchandise Inventory	$510
	Cash		$510
	(To record the payment of delivery charges)
May 12.	Accounts Payable - Troy Wholesalers	$1,300
	Merchandise Inventory		$1,300
	(To record the purchase returns)
May 20.	Accounts Payable - Troy Wholesalers ($31,500 - $1,300)	$30,200
	Merchandise Inventory ($30,200*3/100)		$906
	Cash ($30,200 - $906)		$29,294
	(To record the payment made to Troy Wholesalers after discount)
2) In the books of Troy Wholesalers (seller)
Date	General Journal	Debit	Credit
May 11.	Accounts Receivable - Sydney Retailing	$31,500
	Sales Revenue		$31,500
	(To record the sale of merchandise on account)
May 11.	Cost of Goods Sold	$21,105
	Merchandise Inventory		$21,105
	(To record the cost of goods sold)
May 12.	Sales Returns and Allowances	$1,300
	Accounts Receivable - Sydney Retailing		$1,300
	(To record the sales returns)
May 12.	Merchandise Inventory	$871
	Cost of Goods Sold		$871
	(To record the cost of goods returned)
May 20.	Cash ($30,200 - $906)	$29,294
	Sales Discounts ($30,200 * 3/100)	$906
	Accounts Receivable - Sydney Retailing ($31,500 - $1,300)		$30,200
	(To record receipt of amount that was owed from credit sales)