Business, 23.06.2021 22:10 alex7881

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.)

Required:
a. Prepare journal entries that Sydney Retailing (buyer) records for these three transactions.
b. Prepare journal entries that Troy Wholesalers (seller) records for these three transactions.

Answers: 1

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Answers

Answer from: oktacos

1. Sydney Buyer

11 Dr Accounts Payable $40,000

Cr Merchandise Inventory $40,000

11 Dr Merchandise Inventory $345

Cr Cash $345

12 Dr Merchandise Inventory $1,400

Cr Accounts Payable $1,400

20 Dr Accounts Payable $38,600

Cr Merchandise Inventory $1,158

Cr Cash $37,442

2. Troy - Seller

11 Dr Accounts Receivables $40,000

Cr Sales $40,000

Dr Cost of Goods Sold $30,000

Cr Merchandise Inventory $30,000

13 Dr Sales Returns and Allowances $1,400

Cr Accounts Receivables $1,400

Dr Cost of Good Sold $1,050

Cr Merchandise Inventory $1,050

21 Dr Cash $37,442

Dr Sales Discount $1,158

Cr Accounts Receivables $38,600

Explanation:

1. Preparation of journal entries that Sydney Co. records for these transactions.

1. SYDNEY BUYER

11 Dr Accounts Payable $40,000

Cr Merchandise Inventory $40,000

11 Dr Merchandise Inventory $345

Cr Cash $345

12 Dr Merchandise Inventory $1,400

Cr Accounts Payable $1,400

20 Dr Accounts Payable $38,600

($40,000-$1,400)

Cr Merchandise Inventory $1,158

($38,600-$37,442)

Cr Cash $37,442

[$38,800- [($1,400 × (100% – 3%)]

2. Preparation of the journal entries that Troy Corporation records for these transactions.

TROY - SELLER

11 Dr Accounts Receivables $40,000

Cr Sales $40,000

Dr Cost of Goods Sold $30,000

Cr Merchandise Inventory $30,000

13 Dr Sales Returns and Allowances $1,400

Cr Accounts Receivables $1,400

Dr Cost of Good Sold $1,050

Cr Merchandise Inventory $1,050

21 Dr Cash $37,442

[$38,800- [($1,400 × (100% – 3%)]

Dr Sales Discount $1,158

($38,600-$37,442)

Cr Accounts Receivables $38,600

($40,000-$1,400)

Workings:

May 11 Purchased goods=($40,000 × [100% – 3%])

May 11 Purchased goods= $38,800

May 12 Returned goods= ($1,400 × [100% – 3%]) May 12 Returned goods= $1,358

May 20 Paid balance within the discount period= ($38,800 – $1,358)

May 20 Paid balance within the discount period= $37,442

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Sydney Retailing (buyer) and Troy Wholesalers (seller) enter into the following transactions. May....