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May 11 Sydney accepts delivery of $28,500 of merchandise it purchases for resale from Troy: invoice dated May 11, terms 3/10, n/90, FOB shipping point. The goods cost Troy $19,095. Sydney pays $585 cash to Express Shipping for delivery charges on the merchandise. 12 Sydney returns $1,300 of the $28,500 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 :

TomShelby

Answer:

Sydney entries:

Inventory                 19,680 debit

  Accounts Payable           19,095 credit

 Cash                                      585 credit

--to record purchase and payment of freights--

Accounts Payable   1,300 debit

               Inventory                    1,300 credit

--To record return of goods--

Account Payable 17,795 debit

           Inventory             533.85 credit

           Cash                   17,261.15 credit

--to record payment to Troy within discount period--

Troy entries:

Account Receivable  19,680 debit

  Sales Revenue                          19,680 credit

--to record sale to Sydney--

Accounts Receivable   1,300 debit

               Returns&Allwoance       1,300 credit

--To record returned goods from Sydney--

Cash                               17,261.15 debit

Sales discounts                533.85 debit

        Account Receivable             17,795 debit

--to record collection from Sidney within discount period--

Explanation:

Account Sidney Balance:

invoice nominal: 19,680 - return: 1,300 = 17,795

Discount: 17,795 = 533.85

Cash collection/disbursement: 17,795 - 533.85 = 17,261.15

The freights are paid to another entity not Troy, so are not disclosure on his books.

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