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

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 $34,000 of merchandise it purchases for resale from Troy: invoice dated May 11; terms 3/10, n/90; FOB shipping point. The goods cost Troy $22,780. Sydney pays $365 cash to Express Shipping for delivery charges on the merchandise.
            12           Sydney returns $1,400 of the $34,000 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.




 
 Explanation

1.
May           20           Accounts payable balance = $34,000 – $1,400 = $32,600.
            20           Early payment discount = ($34,000 – $1,400) x 3% = $978.

2. Prepare journal entries that Troy Wholesalers (seller) records for these three transactions.

Explanation
2.
May           20           Early payment discount = ($34,000 – $1,400) x 3% = $978.
            20           Accounts receivable balance = 34,000 – $1,400 = $32,600.

Thank you!