Question

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.

Answer 1

Journal entries for Sydney (buyer)

May 11. Merchandise is accepted.

Dr Merchandise inventory 40,000

Cr Accounts payable 40,000

May 11. Shipping costs.

Dr Merchandise inventory 345

Cr Cash 345

May 12. Returned merchandise.

Dr Accounts payable 1,400

Cr Merchandise inventory 1,400

May 20. invoice paid within discount period.

Dr Accounts payable 38,600

Cr Cash 37,442

Cr Purchase discounts 1,158

Journal entries for Troy (seller)

May 11. Sold merchandise.

Dr Accounts Receivables 40,000

Dr Cost of Goods Sold 30,000

Cr Sales revenue 40,000

Cr Merchandise inventory 30,000

May 12. Returned merchandise.

Dr Sales returns and allowances 1,400

Dr Merchandise inventory 1,050

Cr Accounts receivables 1,400

Cr Cost of goods sold 1,050

May 20. Invoice paid.

Dr Cash 37,442

Dr Sales discounts 1,158

Cr Accounts receivables 38,600