Question

Sydney Retailing (buyer) and Troy Wholesalers (seller) enter into the following transactions. May 11 Sydney accepts delivery of $40,000 of merchandise it purchases for resale from Troy: invoice dated May 11; terms 3/10, n/90; FOB shipping point. The goods cost Troy $30,000. Sydney pays $345 cash to Express Shipping for delivery charges on the merchandise. 12 Sydney returns $1,400 of the $40,000 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $1,050. 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:

Journal Entries in the books of Sydney retailing (buyer)

Date	Particulars	Debit ($)	Credit ($)
May 11	Merchandise Inventory	40000
	Accounts Payable		40000
	(Being Material purchased on account Recorded)
May 11	Merchandise Inventory	345
	Cash		345
	(Being delivery charges recorded)
May 12	Accounts Payable	1400
	Merchandise Inventory		1400
	(Being materials returned recorded)
May 20	Accounts Payable (40000-1400)	38600
	Cash(38600-1158)		37442
	Merchandise inventory (38600*3%)		1158
	(Being payment made on account suppliers recorded)

Journal Entries in the books of Troy whloesaler (seller)

Date	particulars	Debit ($)	Credit ($)
May 11	Accounts receivable	40000
	Sales		40000
	(Being sales on account recorded)
May 11	Cost of goods sold	30000
	Merchandise Inventory		30000
	(Being cost of sales recorded)
May 12	Sales Returns and allowances	1400
	Accounts Receivable		1400
	(Being sales returns recorded)
May 12	Merchandise Inventory	1050
	Cost of goods sold		1050
	(Being cost of returns recorded)
May 20	Cash (38600-1158)	37442
	Sales Discount (38600*3%)	1158
	Accounts Receivable (40000-1400)		38600
	(Being cash received from customers recorded)