On May 11, Sydney Co. accepts delivery of $39,000 of merchandise it purchases fo
ID: 2416871 • Letter: O
Question
On May 11, Sydney Co. accepts delivery of $39,000 of merchandise it purchases for resale from Troy Corporation. With the merchandise is an invoice dated May 11, with terms of 3/10, n/90, FOB shipping point. The goods cost Troy $26,130. When the goods are delivered, Sydney pays $510 to Express Shipping for delivery charges on the merchandise. On May 12, Sydney returns $2,040 of goods to Troy, who receives them one day later and restores them to inventory. The returned goods had cost Troy $1,367. On May 20, Sydney mails a check to Troy Corporation for the amount owed. Troy receives it the following day. (Both Sydney and Troy use a perpetual inventory system.)
1. Prepare journal entries that Sydney Co. records for these transactions.
Prepare journal entries that Troy Corporation records for these transactions.
Explanation / Answer
May 11, York Co. accepts delivery of $39,000 of merchandise it purchases for resale from Troy Corporation. With the merchandise is an invoice dated May 11, with terms of 3/10, n/90, FOB shipping point. The goods cost Troy $26,130. When the goods are delivered, York pays $510 to Express Shipping for delivery charges on the merchandise.
Dr Merchandise inventory (MI) $39,000
Cr Accounts payable (AP) $39,000
Dr MI $510
Cr Cash $510
May 12, York returns $2,040 of goods to Troy, who receives them one day later and restores them to inventory. The returned goods had cost Troy $1,367
Dr AP $2,040
Cr MI $2,040
May 20, York mails a check to Troy Corporation for the amount owed.
Dr AP $36,960
Cr Cash $35851.20
Cr MI $1,108.80
In Troy's books:
Dr Accounts receivable (AR) $39,000
Cr Sales $39,000
Dr COGS$26,130
Cr MI $26,130
May 12, York returns $2040of goods to Troy, who receives them one day later and restores them to inventory. The returned goods had cost Troy $1367
Dr Sales returns and allowances $2,040
Cr AR $2040
Dr MI $1367
Cr COGS $1367
May 20, York mails a check to Troy Corporation for the amount owed.
Dr Cash $35851.20
Dr Sales discounts $1108.80
Cr AR $36960
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