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

Journal entry : Buyer

No	General Journal	Debit	Credit
1	Merchandise inventory	40000
	Account payable		40000
2	Merchandise inventory	345
	Cash		345
3	Account payable	1400
	Merchandise inventory		1400
4	Account payable (40000-1400)	38600
	Cash (38600*97%)		37442
	Merchandise inventory		1158

Journal entries : Seller

No	General Journal	Debit	Credit
1	Account receivable	40000
	Sales revenue		40000
2	Cost of goods sold	30000
	Merchandise inventory		30000
3	Sales return and allowance	1400
	Account receivable		1400
4	Merchandise inventory	1050
	Cost of goods sold		1050
5	Cash (38600*97%)	37442
	Sales discount	1158
	Account receivable (40000-1400)		38600