Question

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

May		11		Sydney accepts delivery of $25,000 of merchandise it purchases for resale from Troy: invoice dated May 11, terms 3/10, n/90, FOB shipping point. The goods cost Troy $16,750. Sydney pays $535 cash to Express Shipping for delivery charges on the merchandise.
		12		Sydney returns $1,300 of the $25,000 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $871.
		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

No.	Date	ACCOUNT TITLES AND EXPLANATIONS	DEBIT ($)	CREDIT ($)
1	May 11	Merchandise Inventory	25000
		Accounts Payable		25000
2	May 11	Merchandise Inventory	535
		Cash		535
3	May 12	Accounts Payable	1300
		Merchandise Inventory		1300
4	May 20	Accounts Payable	23700
		Merchandise Inventory		711
		Cash		22989

2

Date	account and explanation	Debit	Credit
May-11	Account receivable	25000
	Sales revenue		25000
	Cost of goods sold	16750
	Merchandise inventory		16750
May-12	Sales return and allowance	1300
	Account receivable		1300
	Merchandise inventory	871
	Cost of goods sold		871
May-20	Cash	22989
	Sales discount	711
	Account receivable		23700