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[The following information applies to the questions displayed below]
Syaney Retailing (buyer) and Troy Wholesalers (seller) enter into the following transactions.

Nay 11 Sydney accepts delivery of of merchandise it purchases for resale from Troy: invoice dated May 11 , terms , PO8 shipping point. The goods cost Troy . Sydney pays cash to Express Shipping for delivery charges on the merchandise.
May 12 Sydney returns of the of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy .
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 net method)

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

Ask by Romero Montgomery. in the United States

Mar 19,2025

Question

Required information
[The following information applies to the questions displayed below]
Syaney Retailing (buyer) and Troy Wholesalers (seller) enter into the following transactions.

Nay 11 Sydney accepts delivery of of merchandise it purchases for resale from Troy: invoice dated May 11 , terms , PO8 shipping point. The goods cost Troy . Sydney pays cash to Express Shipping for delivery charges on the merchandise.
May 12 Sydney returns of the of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy .
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 net method)

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

Ask by Romero Montgomery. in the United States

Mar 19,2025

UpStudy AI · Accepted Answer

**May 11 – Purchase and Freight-in**

1. Record the merchandise purchase under the net method. The invoice amount is $$ \$40,\!000 $$ and the discount is $$ 3\% $$. Under the net method the inventory is recorded at  
$$
\$40,\!000 \times (1 - 0.03) = \$38,\!800.
$$
   
   - Journal Entry:
     - $$\text{Debit Inventory } \$38,\!800$$  
     - $$\text{Credit Accounts Payable } \$38,\!800$$

2. Record the freight cost. Sydney pays $$ \$390 $$ cash for delivery, and under a perpetual system freight‐in is added to inventory.
   
   - Journal Entry:
     - $$\text{Debit Inventory } \$390$$  
     - $$\text{Credit Cash } \$390$$

---

**May 12 – Return of Merchandise**

Sydney returns merchandise with an invoice amount of $$ \$1,\!900 $$. Under the net method, the reduction is recorded at the discounted amount:
$$
\$1,\!900 \times (1 - 0.03) = \$1,\!843.
$$
   
   - Journal Entry:
     - $$\text{Debit Accounts Payable } \$1,\!843$$  
     - $$\text{Credit Inventory } \$1,\!843$$

---

**May 20 – Payment to Troy Wholesalers**

After the return, the balance in Accounts Payable is reduced as follows:
$$
\$38,\!800 - \$1,\!843 = \$36,\!957.
$$
Sydney pays this amount in cash within the discount period.
   
   - Journal Entry:
     - $$\text{Debit Accounts Payable } \$36,\!957$$  
     - $$\text{Credit Cash } \$36,\!957$$
**Journal Entries for Sydney Retailing:** 1. **May 11 – Purchase and Freight-in** - **Debit Inventory** \$38,800 - **Credit Accounts Payable** \$38,800 - **Debit Inventory** \$390 - **Credit Cash** \$390 2. **May 12 – Return of Merchandise** - **Debit Accounts Payable** \$1,843 - **Credit Inventory** \$1,843 3. **May 20 – Payment to Troy Wholesalers** - **Debit Accounts Payable** \$36,957 - **Credit Cash** \$36,957

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