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Sydney Retailing (buyer) and Troy Wholesalers (seller) enter into the following transactions. May 11 Sydney accepts delivery of 25,000 dollars of merchandise it purchases for resale from Troy: invoice dated. Prepare journal entries that Sydney Retailing (buyer) records for these three transactions. Prepare journal entries that Troy Wholesalers (seller) records for these three transactions.

  1. May 11, terms 3/10, n/90, FOB shipping point. The goods cost Troy 16,750 dollars. Sydney pays 410 dollars cash to Express Shipping for delivery charges on the merchandise.
  2. On May 12 Sydney returns 1,400 dollars of the 25,000 dollars of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy 938 dollars.
  3. On May 20 Sydney pays Troy for the amount owed. Troy receives the cash immediately.

This question aims to find the three transactions for the seller and buyers. This question uses the concept of inventory for the sellers and buyers.

Expert Answer

Buyer entries are:

May  $ 11 $ the Merchandise Dr inventory is  $ 25000 $ dollars.

Account payable Cr is  $ 25000 $ dollars.

Merchandise inventory Dr is $ 410 $ dollars.

Its cash is  $ 410 $ dollars.

May  $ 12 $ the Merchandise Dr account payable is  $ 1400 $ dollars.

Merchandise inventory Cr is $ 1400 $ dollars.

$ 20 $  May the Dr account payable is  $ 23600 $ dollars.

And its cash is  $ 22892 $ dollars.

Merchandise inventory is $ 708 $ dollars.

Now transaction entries for Seller are:

$ 11 $  May the Dr account receivable is  $ 25000 $ dollars.

Revenue of sales Cr is $ 25000 $ dollars.

Good sold cost is $ 16750 $ dollars.

Inventory merchandise  Dr is $ 16750 $ dollars.

$ 12 $  May the Dr sales allowances and return is  $ 1400 $ dollars.

Receivable account Cr is $ 1400 $ dollars.

Inventory merchandise  Dr is $ 938 $ dollars.

Good sold cost is $ 938 $ dollars.

$ 20 $  May the Dr cash is  $ 22892 $ dollars.

Discount is $ 708 $ dollars.

And the receivable account is $ 23600 $ dollars.

Numerical Results

The discount amount for the seller is $ 708 $ dollars.

Example

On May 11 Sydney takes delivery of the $25,000 $ dollars worth of goods it ordered from Troy to resell: the invoice is dated. Terms: May 11, FOB shipment point, 3/10, n/90. Troy paid $16,750 $ dollars for the goods. Sydney pays Express Shipping $410$ dollars in cash for the product’s delivery fees. $12$ Sydney gives Troy $ 1,400 $ dollars from $25,000$ dollars worth of products back, which Troy accepts that day and adds to its inventory. Troy had spent $938.20 $ dollars on the returned products. Sydney reimburses Troy for the debt. Troy gets the money right away. Prepare journal entries for these transactions for the seller and buyers.

Buyer entries are:

May  $ 11 $ the Merchandise Dr inventory is  $ 26000 $ dollars.

Account payable Cr is  $ 26000 $ dollars.

Merchandise inventory Dr is $ 410 $ dollars.

Its cash is  $ 410 $ dollars.

May  $ 12 $ the Merchandise Dr account payable is  $ 1400 $ dollars.

Merchandise inventory Cr is $ 1400 $ dollars.

$ 20 $  May the Dr account payable is  $ 24600 $ dollars.

And its cash is  $ 23862 $ dollars.

Merchandise inventory is $ 738 $ dollars.

Now transaction entries for Seller are:

$ 11 $  May the Dr account receivable is  $ 26000 $ dollars.

Revenue of sales Cr is $ 26000 $ dollars.

Good sold cost is $ 16750 $ dollars.

Inventory merchandise  Dr is $ 16750 $ dollars.

$ 12 $  May the Dr sales allowances and return is  $ 1400 $ dollars.

Receivable account Cr is $ 1400 $ dollars.

Inventory merchandise  Dr is $ 938 $ dollars.

Good sold cost is $ 938 $ dollars.

$ 20 $  May the Dr cash is  $ 23862 $ dollars.

Discount is $ 738 $ dollars.

And the receivable account is $ 24600 $ dollars.

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