Sydney Retailing buyer and Troy Wholesalers seller enter int

Sydney Retailing (buyer) and Troy Wholesalers (seller) enter into the following transactions. May 11 Sydney accepts delivery of $38,500 of merchandise it purchases for resale from Troy: invoice dated May 11 terms 3/10, n/90; FOB shipping point. The goods cost Troy $25,795. Sydney pays $450 cash to Express Shipping for delivery charges on the merchandise. 12 Sydney returns $1,400 of the $38,500 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $938. 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.

Solution

Answers

Amount of Cash Discount:

Total Sales = $ 38,500
Sales Return = $ 1,400

Amount receivables = 38500 – 1400 = $ 37,100

Cash Discount = 37,100 x 3% = $ 1,113

Requirement 1

Date

General Journal

Debit

Credit

May-11

Inventory

$      38,500.00

Accounts Payable [Troy]

$       38,500.00

[merchandise purchased]

May-11

Inventory

$            450.00

Cash

$             450.00

[freight paid in cash]

May-12

Accounts Payable [Troy]

$        1,400.00

Inventory

$          1,400.00

[merchandise returned to Troy]

May-20

Accounts Payable [Troy]

$      37,100.00

Inventory

$          1,113.00

Cash

$       35,987.00

[Cash paid within discount term of 10 days, availing cash discount]

Requirement 2

Date

General Journal

Debit

Credit

May-11

Accounts receivables

$ 38,500.00

Sales Revenue

$ 38,500.00

[merchandise sold]

May-11

Cost of Goods Sold

$ 25,795.00

Inventory

$ 25,795.00

[cost of merchandise sold]

May-12

Sales Return

$    1,400.00

Accounts receivables

$    1,400.00

[merchandise retured back]

May-12

Inventory

$        938.00

Cost of Goods Sold

$        938.00

[cost of merchandise retured]

May-20

Cash

$ 35,987.00

Sales Discount

$    1,113.00

Accounts receivables

$ 37,100.00

[Cash received within discount term of 10 days]

Requirement 1
Date	General Journal	Debit	Credit
May-11	Inventory	$      38,500.00
	Accounts Payable [Troy]		$       38,500.00
	[merchandise purchased]
May-11	Inventory	$            450.00
	Cash		$             450.00
	[freight paid in cash]
May-12	Accounts Payable [Troy]	$        1,400.00
	Inventory		$          1,400.00
	[merchandise returned to Troy]
May-20	Accounts Payable [Troy]	$      37,100.00
	Inventory		$          1,113.00
	Cash		$       35,987.00
	[Cash paid within discount term of 10 days, availing cash discount]