Answer:
Journal entries for Sydney (buyer)
May 11. Merchandise is accepted.
Dr Merchandise inventory 40,000
Cr Accounts payable 40,000
May 11. Shipping costs.
Dr Merchandise inventory 345
Cr Cash 345
May 12. Returned merchandise.
Dr Accounts payable 1,400
Cr Merchandise inventory 1,400
May 20. invoice paid within discount period.
Dr Accounts payable 38,600
Cr Cash 37,442
Cr Purchase discounts 1,158
Journal entries for Troy (seller)
May 11. Sold merchandise.
Dr Accounts Receivables 40,000
Dr Cost of Goods Sold 30,000
Cr Sales revenue 40,000
Cr Merchandise inventory 30,000
May 12. Returned merchandise.
Dr Sales returns and allowances 1,400
Dr Merchandise inventory 1,050
Cr Accounts receivables 1,400
Cr Cost of goods sold 1,050
May 20. Invoice paid.
Dr Cash 37,442
Dr Sales discounts 1,158
Cr Accounts receivables 38,600
