Question

On May 11, Sydney Co. accepts delivery of $40,000 of merchandise it purchases for resale from Troy Corporation. With the merchandise is an invoice dated May 11, with terms of 3/10, n/90, FOB shipping point. The goods cost Troy $30,000. When the goods are delivered, Sydney pays $345 to Express Shipping for delivery charges on the merchandise. On May 12, Sydney returns $1,400 of goods to Troy, who receives them one day later and restores them to inventory. The returned goods had cost Troy $800. On May 20, Sydney mails a check to Troy Corporation for the amount owed. Troy receives it the following day. (Both Sydney and Troy use a perpetual inventory system.)1. Prepare journal entries that Sydney Co. records for these transactions.2. Prepare journal entries that Troy Corporation records for these transactions.

Answer 1

Answer:

1) Journal entries of Sydney Co.  

May 11

• Dr Merchandise Inventory 40,000
• Cr Accounts Payable 40,000

• Dr Merchandise Inventory 345
• Cr Cash 345

May 12

• Dr Accounts Payable 1,400
• Cr Merchandise Inventory 1,400

May 20

• Dr Accounts Payable 38,600
• Cr Cash 37,442
• Cr Merchandise Inventory 1,158

2) Journal entries of Troy Co.  

May 11

• Dr Accounts Receivables 40,000
• Cr Sales revenue 40,00 0

• Dr Cost of Goods Sold 30,000
• Cr Merchandise Inventory 30,000

May 13

• Dr Sales Returns and Allowances 1,400
• Cr Accounts Receivables 1,400

• Dr Merchandise Inventory 800
•  Cr Cost of Goods Sold 800

May 21

• Dr Cash 37,442
• Dr Sales Discount 1,158
• Cr Accounts Receivables 38,600