Required information (The following information applies to the questions displayed below) Sydney Retailing (buyel) and Troy Wholesalers (seller) enter into the following transactions. May 11 Sydney accents dellvary of $$ 44 a $$, aea of merchantise it purchases for pestile from Troyl favolce dated May 11 , terms $$ 3 / 10, \mathrm{n} / 00 $$, FOB shipping polnt. The goods cost Troy 830,000 . Sydney pays $$ \$ 390 $$ eash to frpress shipping for dellvery charges on the merchandise. May 12 Sydney returns $$ \$ 1,900 $$ of the $$ \$ 40,009 $$ of goods to Troy, who recelves them the same day and restores them to fts Anventory, the retumed gouts had cosi Troy 81,425 , May 20 Sydney pays Troy for the amount owed. Troy recelves the eash immediately, (Both Sydney and Troy use a perpetual inventory system and the net method) 2. Prepare journal entries that Troy Wholesalers (seller) records for these three transactions.

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**May 11 – Record the Sale**  
Since both parties use the net method the seller (Troy) records the sale assuming the discount will be taken. The invoice is for  
$$
\$40{,}009
$$
and the discount is 3%. Thus, the discount amount is  
$$
0.03\times \$40{,}009 = \$1{,}200.27,
$$
and the sale (net) is recorded at  
$$
\$40{,}009 - \$1{,}200.27 = \$38{,}808.73.
$$

Troy’s journal entries are:

1. To record the sales revenue:
   - Debit: Accounts Receivable $$ \$38{,}808.73 $$
   - Credit: Sales Revenue $$ \$38{,}808.73 $$

2. To record the cost of the merchandise sold (cost given is $$ \$830{,}000 $$):
   - Debit: Cost of Goods Sold $$ \$830{,}000 $$
   - Credit: Inventory $$ \$830{,}000 $$

---

**May 12 – Record the Sales Return**  
Sydney returns merchandise with an invoice amount of  
$$
\$1{,}900.
$$
Under the net method the return is recorded at the discounted price. The discount on the returned merchandise is  
$$
0.03\times \$1{,}900 = \$57,
$$
so the net return amount is  
$$
\$1{,}900 - \$57 = \$1{,}843.
$$

Also, the cost of the returned goods is given as  
$$
\$81{,}425.
$$

Troy’s journal entries for the return are:

1. To reduce accounts receivable for the returned merchandise:
   - Debit: Sales Returns and Allowances $$ \$1{,}843 $$
   - Credit: Accounts Receivable $$ \$1{,}843 $$

2. To reinstate the inventory for the returned goods:
   - Debit: Inventory $$ \$81{,}425 $$
   - Credit: Cost of Goods Sold $$ \$81{,}425 $$

---

**May 20 – Record Receipt of Cash Payment**  
After the return the net amount due under the accounts receivable is:
$$
\$38{,}808.73 - \$1{,}843 = \$36{,}965.73.
$$

When Sydney pays, Troy’s journal entry is:

- Debit: Cash $$ \$36{,}965.73 $$
- Credit: Accounts Receivable $$ \$36{,}965.73 $$
**Troy Wholesalers' Journal Entries:** 1. **May 11 – Sale:** - Debit: Accounts Receivable $$ \$38{,}808.73 $$ - Credit: Sales Revenue $$ \$38{,}808.73 $$ - Debit: Cost of Goods Sold $$ \$830{,}000 $$ - Credit: Inventory $$ \$830{,}000 $$ 2. **May 12 – Sales Return:** - Debit: Sales Returns and Allowances $$ \$1{,}843 $$ - Credit: Accounts Receivable $$ \$1{,}843 $$ - Debit: Inventory $$ \$81{,}425 $$ - Credit: Cost of Goods Sold $$ \$81{,}425 $$ 3. **May 20 – Cash Receipt:** - Debit: Cash $$ \$36{,}965.73 $$ - Credit: Accounts Receivable $$ \$36{,}965.73 $$

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