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 \( \$ 40,000 \) of merchandise it purchases for resale from Troy: invoice dated May 11 , terms \( 3 / 10, \mathrm{n} / 90 \), PO8 shipping point. The goods cost Troy \( \$ 30,000 \). Sydney pays \( \$ 390 \) cash to Express Shipping for delivery charges on the merchandise. May 12 Sydney returns \( \$ 1,900 \) of the \( \$ 40,000 \) of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy \( \$ 1,425 \). 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) 1. Prepare journal entries that Sydney Retailing (buyer) records for these three transactions

Sure! Let’s have some fun diving into Sydney Retailing’s journal entries for these transactions. On May 11, when Sydney accepts delivery of merchandise, they record the purchase along with the shipping costs. Here’s how that goes: **May 11** - **Purchase Inventory** Debit: Inventory (Merchandise Cost) $40,000 Debit: Inventory (Shipping Charge) $390 Credit: Accounts Payable $40,390 Next, when Sydney returns a portion of the goods to Troy, they need to adjust their inventory and accounts payable accordingly. **May 12** - **Return Merchandise** Debit: Accounts Payable $1,900 Credit: Inventory $1,900 Finally, when Sydney pays off the remaining balance to Troy, they make the cash payment entry. **May 20** - **Payment to Troy** Debit: Accounts Payable $38,490 Credit: Cash $38,490 With these entries, Sydney effectively keeps track of inventory and payments, showcasing the magic of a perpetual inventory system in keeping financial records in harmony!