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Way 11 Sydney accepts delivery of [tex]\$35,000[/tex] of merchandise it purchases for resale from Troy; invoice dated May 11, terms [tex]3/10, n/90[/tex], FOB shipping point. The goods cost Troy [tex]\$23,450[/tex]. Sydney pays [tex]\$470[/tex] cash to Express Shipping for delivery charges on the merchandise.

May 12 Sydney returns [tex]\$1,200[/tex] of the [tex]\$35,000[/tex] of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy [tex]\$804[/tex].

May 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.

Complete this question by entering your answers in the tabs below.

Required 1
Required 2

Prepare journal entries that Sydney Retailing (buyer) records for these three transactions.

\begin{tabular}{|c|c|c|c|c|c|}
\hline
I & No & Date & General Journal & Debit & Credit \\
\hline
\multirow[t]{3}{}{1} & 1 & May 11 & Merchandise Inventory & 35,000 & \\
\cline{2-6}
& & & Accounts Payable & & 35,000 \\
\hline
\multirow[t]{3}{}{2} & 2 & May 11 & Merchandise Inventory & 470 & \\
\cline{2-6}
& & & Cash & & 470 \\
\hline
\multirow[t]{3}{}{3} & 3 & May 12 & Accounts Payable & 1,200 & \\
\cline{2-6}
& & & Merchandise Inventory & & 1,200 \\
\hline
\multirow[t]{3}{}{4} & 4 & May 20 & Accounts Payable & 33,800 & \\
\cline{2-6}
& & & Cash & & 32,786 \\
\hline
\end{tabular}



Answer :

GinnyAnswer
Let's prepare the journal entries for Sydney Retailing (the buyer) for the transactions that took place on May 11, May 12, and May 20.

### Transaction on May 11
Sydney accepts delivery of [tex]$35,000 worth of merchandise and pays $[/tex]470 for shipping. The journal entries would be:

1. For the purchase of merchandise:
- Debit: Merchandise Inventory [tex]$35,000 - Credit: Accounts Payable $[/tex]35,000

2. For the payment of shipping charges:
- Debit: Merchandise Inventory [tex]$470 - Credit: Cash $[/tex]470

### Transaction on May 12
Sydney returns [tex]$1,200 worth of merchandise to Troy. The journal entry would be: 3. For the return of merchandise: - Debit: Accounts Payable $[/tex]1,200
- Credit: Merchandise Inventory [tex]$1,200 ### Transaction on May 20 Sydney pays the amount owed to Troy, taking advantage of the 3% discount for early payment. The journal entries would be: 4. For the payment to Troy: - Debit: Accounts Payable $[/tex]33,800 (this is the amount after deducting the returned goods from the initial amount)
- Credit: Cash [tex]$32,786 - Credit: Merchandise Inventory $[/tex]1,014 (this is the discount amount, 3% of [tex]$33,800) Combining these entries into the format you provided: \[ \begin{array}{|c|c|c|c|c|c|} \hline I & No. & Date & General Journal & Debit & Credit \\ \hline \multirow{3}{*}{$[/tex]1[tex]$} & 1 & May 11 & Merchandise Inventory & 35,000 & \\ \cline{2-6} & & & Accounts Payable & & 35,000 \\ \cline{2-6} & & & & & \\ \hline \multirow{3}{*}{1} & 2 & May 11 & Merchandise Inventory & 470 & \\ \cline{2-6} & & & Cash & & 470 \\ \cline{2-6} & & & & & \\ \hline \multirow{3}{}{$[/tex]1$} & 3 & May 12 & Accounts Payable & 1,200 & \\
\cline{2-6}
& & & Merchandise Inventory & & 1,200 \\
\cline{2-6}
& & & & & \\
\hline
\multirow{2}{}{1} & 4 & May 20 & Accounts Payable & 33,800 & \\
\cline{2-6}
& & & Cash & & 32,786 \\
\cline{2-6}
& & & Merchandise Inventory & & 1,014 \\
\hline
\end{array}
\]

These entries conform to the perpetual inventory system and gross method, reflecting the cost of goods and respective discounts applied.

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