Question

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

May		11		Sydney accepts delivery of $33,500 of merchandise it purchases for resale from Troy: invoice dated May 11; terms 3/10, n/90; FOB shipping point. The goods cost Troy $22,445. Sydney pays $335 cash to Express Shipping for delivery charges on the merchandise.
		12		Sydney returns $1,400 of the $33,500 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

1.

Date	Account Title	Debit	Credit
MAy11	Merchandise Inventory	$33500
	Accounts Payable		$33500
MAy 11	Merchandise Inventory	$335
	Cash		$335
MAy 12	Accounts Payable	$1400
	Merchandise Inventory		$1400
MAy 20	Accounts Payable ($33500 - $1400)	$32100
	Merchandise Inventory (purchase discount $32100*3% )		$963
	Cash ($32100 - $963%)		$31137

2.

Date	Account Title	Debit	Credit
May 11	Accounts Receivables	$33500
	Sales		$33500
May 11	Cost Of Goods Sold	$22445
	Merchandise Inventory		$22445
May 12	Sales Returns And Allowances	$1400
	Accounts Receivables		$1400
May 12	Merchandise Inventory	$938
	Cost Of Goods Sold		$938
May 20	Cash	$31137
	Sales Discount	$963
	Accounts Receivables		$32100