Question

Required information

Skip to question

[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 $50,000 of merchandise it purchases for resale from Troy: invoice dated May 11, terms 3/10, n/90, FOB shipping point. The goods cost Troy $31,000. Sydney pays $300 cash to Express Shipping for delivery charges on the merchandise.
May		12		Sydney returns $1,000 of the $50,000 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $620.
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.)

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

Answer 1

Journal entries

Date	general Journal	Debit	Credit
May 11	Account receivable (50000*97%)	48500
	Sales revenue		48500
	(To record sales)
	Cost of goods sold	31000
	Merchandise inventory		31000
	(To record cost of goods sold)
May 12	Sales return and allowance (1000*97%)	970
	Account receivable		970
	(To record sales return)
	Merchandise inventory	620
	Cost of goods sold		620
	(To record cost of goods returned)
May 20	Cash (48500-970)	47530
	Account receivable		47530