Question

Sydney Retailing (buyer) and Troy Wholesalers (seller) enter into the following transactions. May 11 Sydney accepts delivery of $39,000 of merchandise it purchases for resale from Troy: invoice dated May 11; terms 3/10, n/90; FOB shipping point. The goods cost Troy $26,130. Sydney pays $550 cash to Express Shipping for delivery charges on the merchandise. 12 Sydney returns $2,200 of the $39,000 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $1,474. 20 Sydney pays Troy for the amount owed. Troy receives the cash immediately. Assume that both buyer and seller use a periodic inventory system and the gross method.

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

2. Prepare journal entries that Troy Wholesalers records for these transactions.

Answer 1

Answer :-

1 ) :-

Date	General journal	Debit	Credit
May 11	Purchases	$39,000
	Accounts payable		$39,000
May 11	Transportation-in	$550
	Cash		$550
May 12	Accounts payable	$2,200
	Purchases returns & allowances		$2,200
May 20	Accounts payable [ $39,000 - $2,200 ]	$36,800
	Purchases discounts [ $36,800 * 3% ]		$1,104
	Cash [ $36,800 - $1,104 ]		$35,696

2 ) :-

Date	General journal	Debit	Credit
May 11	Accounts receivable	$39,000
	Sales		$39,000
May 11	Cost of goods sold	$26,130
	Inventory		$26,130
May 12	Sales returns and allowances	$2,200
	Accounts receivable		$2,200
May 12	Inventory Account	$1,474
	Cost of goods sold		$1,474
May 20	Cash  [ $36,800 - $1,104 ]	$35,696
	Sales discounts [ $36,800 * 3% ]	$1,104
	Accounts receivable [ $39,000 - $2,200 ]		$36,800