Exercise 4-7 Recording sales, purchases, shipping, and returns-buyer and seller LO P1, P2

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

May		11		Sydney accepts delivery of $21,000 of merchandise it purchases for resale from Troy: invoice dated May 11; terms 3/10, n/90; FOB shipping point. The goods cost Troy $14,070. Sydney pays $585 cash to Express Shipping for delivery charges on the merchandise.
		12		Sydney returns $1,400 of the $21,000 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $938.
		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.

Required 1

• Sydney accepts delivery of $21,000 of merchandise it purchases for resale from Troy: invoice dated May 11; terms 3/10, n/90; FOB shipping point. The goods cost Troy $14,070.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
May 11

• Sydney pays $585 cash to Express Shipping for delivery charges on the merchandise.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
May 11

• Sydney returns $1,400 of the $21,000 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $938.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
May 12

• Sydney pays Troy for the amount owed. Troy receives the cash immediately.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
May 20

Required 2

1

• Record the merchandise sold on account.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
May 11

2

• Record the cost of goods sold.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
May 11

3

• Record the sales return.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
May 12

4

• Record the cost of sales return.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
May 12

5

• Record the cash collected for credit sales.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
May 20