Question

Sydney Retailing (buyer) and Troy Wholesalers (seller) enter into the following transactions.May 11 Sydney accepts delivery of $31,500 of merchandise it purchases for resale from Troy: invoice dated May 11; terms 3/10, n/90; FOB shipping point. The goods cost Troy $21,105. Sydney pays $635 cash to Express Shipping for delivery charges on the merchandise.12 Sydney returns $1,500 of the $31,500 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $1,005.20 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

Answer and Explanation:

The Journal entries are prepared below:-

1. Merchandise inventory Dr, $31,500

To Accounts payable $31,500

(Being purchase of inventory on the account is recorded)

2. Merchandise inventory Dr, $635

To Cash $635

(Being cash paid is recorded)

3. Accounts payable Dr, $1,500

To Merchandise inventory $1,500

(Being return inventory is recorded)

4. Accounts payable Dr, $30,000

To Merchandise inventory $900 ($30,000 × 3%)

To Cash $29,100 ($30,000 × 97%)

(Being cash paid is recorded)

b. 1. Accounts receivable Dr, $31,500

To Sales $31,500

(Being sales is recorded)

2. Cost of goods sold Dr, $21,105

To Merchandise inventory $21,105

(Being cost of goods sold is recorded)

3. Sales return and allowances Dr, $1,500

To Accounts receivable $1,500

(Being returns is recorded)

4. Merchandise inventory Dr, $1,005

To cost of goods sold $1,005

(Being returned goods is recorded)

5. Cash Dr, $29,100

Sales discounts Dr, $900

To Accounts receivable $30,000

(Being cash received is recorded)