Question

Exercise 5-19A Recording sales, purchases, shipping, and returns: buyer and seller-periodic LO P5 Sydney Retailing (buyer) and Troy Wholesalers (seller) enter into the following transactions. May 11 Sydney accepts delivery of $35,000 of merchandise it purchases for resale from Troy: invoice dated May 11, terms 3/10, n/90, FOB shipping point. The goods cost Troy $23,450. Sydney pays $690 cash to Express Shipping for delivery charges on the merchandise. 12 Sydney returns $2,800 of the $35,000 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $1,876. 20 Sydney pays Troy for the amount owed. Troy receives the cash immediately. Assume that both buyer and seller use a periodic 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 shown below:-

1. Inventory Dr, $35,000

           To Accounts Payable $35,000

(Being merchandise purchase on credit is recorded)

2. Freight-in Dr, $690

         To Cash $690

(Being payment of delivery charges is recorded)

3. Accounts Payable Dr, $2,800

        To Purchase returns and allowances Accounts Payable $2,800

(Being return of merchandise on credit is recorded)

4. Accounts Payable Dr, $32,200 ($35,000 - $2,800)

        To Purchase discounts $1,050 ($35,000 × 3%)

        To Cash $31,150

(Being cash payment is recorded)

5. Accounts Receivable Dr, $35,000

       To Sales  $35,000

(Being merchandise sale on credit is recorded)

6. Sales Return Dr, $2,800

      To Accounts receivable $2,800

(Being return of merchandise on credit is recorded)

7. Cash Dr, $31,150  ($35,000 - $2,800 - $1,050)

Sales discount Dr, $1,050

      To Accounts Receivable $30,100

(Being cash received is recorded)