Question

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

May		11		Sydney accepts delivery of $37,000 of merchandise it purchases for resale from Troy: invoice dated May 11, terms 3/10, n/90, FOB shipping point. The goods cost Troy $24,790. Sydney pays $605 cash to Express Shipping for delivery charges on the merchandise.
		12		Sydney returns $1,400 of the $37,000 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.

Answer 1

Answer of Part 1: Credit Date May 11 Debit 37,000 37,000 May 11 605 605 Accounts Titles and Explanation Merchandise Inventory Accounts Payable Merchandise Inventory Cash Accounts Payable Merchandise Inventory Accounts Payable ($37,000-$1,400) Cash($35,600-$1,068) Merchandise Inventory ($35,600*3%) May 12 1,400 1,400 May 20 35,600 34,532 1,068 Answer of part 2: Credit Date May 11 Debit 37,000 37,000 May 11 24,790 24,790 May 12 1,400 Accounts Titles and Explanation Accounts Receivable Sales Revenue Cost of Goods Sold Merchandise Inventory Sales Return and Allowance Accounts Receivable Merchandise Inventory Cost of Goods sold Cash ($35,600-$1,068) Sales Discount ($35,600*3%) Accounts Receivable ($37,000-$1,400) 1,400 May 12 938 938 May 20 34,532 1,068 35,600