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!

Allied Merchandisers was organized on May 1. Macy Co. is a major customer (buyer) of Allied (seller) products.

Use the following information for the Exercises below.

Allied Merchandisers was organized on May 1. Macy Co. is a major customer (buyer) of Allied (seller) products.

May           3           Allied made its first and only purchase of inventory for the period on May 3 for 2,000 units at a price of $11 cash per unit (for a total cost of $22,000).
            5           Allied sold 1,000 of the units in inventory for $15 per unit (invoice total: $15,000) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $11,000.
            7           Macy returns 100 units because they did not fit the customer’s needs (invoice amount: $1,500). Allied restores the units, which cost $1,100, to its inventory.
            8           Macy discovers that 100 units are scuffed but are still of use and, therefore, keeps the units. Allied sends Macy a credit memorandum for $700 toward the original invoice amount to compensate for the damage.
            15           Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns, allowances, and any cash discount.
Prepare the appropriate journal entries for Macy Co. to record each of the May transactions. Macy is a retailer that uses the gross method and a perpetual inventory system, and purchases these units for resale.
 

Explanation

May           7:           Returned unwanted merchandise. (100 units x $15) = $1,500.
May           15:           Accounts payable paid for May 5 purchase less R&A. ($15,000 – $1,500 – $700) = $12,800.
May           15:           Merchandise inventory paid for May 5 purchase less R&A. ($15,000 – $1,500 – $700) x 2% = $256.

Thank you!

Allied Merchandisers was organized on May 1. Macy Co. is a major customer (buyer) of Allied (seller) products.

Use the following information for the Exercises below.

Allied Merchandisers was organized on May 1. Macy Co. is a major customer (buyer) of Allied (seller) products.

May           3           Allied made its first and only purchase of inventory for the period on May 3 for 2,000 units at a price of $11 cash per unit (for a total cost of $22,000).
            5           Allied sold 1,000 of the units in inventory for $15 per unit (invoice total: $15,000) to Macy Co. under credit terms 2/10, n/60. The goods cost Allied $11,000.
            7           Macy returns 100 units because they did not fit the customer’s needs (invoice amount: $1,500). Allied restores the units, which cost $1,100, to its inventory.
            8           Macy discovers that 100 units are scuffed but are still of use and, therefore, keeps the units. Allied sends Macy a credit memorandum for $700 toward the original invoice amount to compensate for the damage.
            15           Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns, allowances, and any cash discount.

Prepare journal entries to record the following transactions for Allied assuming it uses a perpetual inventory system and the gross method. (Allied estimates returns using an adjusting entry at each year-end.)


Explanation

May           3:           Purchased goods. (2,000 units x $11). = $22,000.
May           5:           Sold goods on credit. (1,000 units x $15). = $15,000.
May           5:           Record cost of sale. (1,000 units x $11). = $11,000.
May           7:           Accepted returns. (100 units x $15). = $1,500.
May           7:           Returned goods to inventory. (100 units x $11). = $1,100.
May           15:           Sales discount received payment within discount period. ($15,000 – $1,500 – $700) x 2% = $256.
May           15:           Accounts receivable balance as of May 15. ($15,000 – $1,500 – $700) = $12,800.