Question

Required information [The following information applies to the questions displayed below.] Sydney Retailing (buyer) and Troy Wholesalers (seller) enter into the following transactions. May 11 Sydney accepts delivery of $45,000 of merchandise it purchases for resale from Troy: invoice dated May 11; terms 3/10, n/90; FOB shipping point. The goods cost Troy $33,000. Sydney pays $320 cash to Express Shipping for delivery charges on the merchandise. May 12 Sydney returns $1,200 of the $45,000 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $880. May 20 Sydney pays Troy for the amount owed. Troy receives the cash immediately. (Both Sydney and Troy use a perpetual inventory system and the net method.)

1. Prepare journal entries that Sydney Retailing records for these transactions.

Answer 1

Journal entry : In the books of Sydney Retailing

Date	account and explanation	debit	credit
May 11	Merchandise inventory (45000*97%)	43650
	Account payable		43650
	(To record purchase)
May 11	Merchandise inventory	320
	Cash		320
	(To record delivery charges)
May 12	Account payable (1200*97%)	1164
	Merchandise inventory		1164
	(To record goods returned)
May 20	Account payable	42486
	Cash		42486
	(To record amount paid)