Sydney Retailing (buyer) and Troy Wholesalers (seller) enter into the following transactions. May 11 Sydney accepts delivery of $34,000 of merchandise it purchases for resale from Troy: invoice dated May 11; terms 3/10, n/90; FOB shipping point. The goods cost Troy $22,780. Sydney pays $515 cash to Express Shipping for delivery charges on the merchandise. 12 Sydney returns $1,300 of the $34,000 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $871. 20 Sydney pays Troy for the amount owed. Troy receives the cash immediately. (Both Sydney and Troy use a perpetual inventory system and the gross method.) 1. Prepare journal entries that Sydney Retailing (buyer) records for these three transactions. 2. Prepare journal entries that Troy Wholesalers (seller) records for these three transactions. Record the merchandise sold on account. Record the cost of goods sold. Record the sales return. Record the cost of sales return. Record the cash collected for credit sales.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Sydney Retailing (buyer) and Troy Wholesalers (seller) enter into the following transactions.
| May | 11 | Sydney accepts delivery of $34,000 of merchandise it purchases for resale from Troy: invoice dated May 11; terms 3/10, n/90; FOB shipping point. The goods cost Troy $22,780. Sydney pays $515 cash to Express Shipping for delivery charges on the merchandise. | ||
| 12 | Sydney returns $1,300 of the $34,000 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $871. | |||
| 20 | Sydney pays Troy for the amount owed. Troy receives the cash immediately. |
(Both Sydney and Troy use a perpetual inventory system and the gross method.)
1. Prepare
2. Prepare journal entries that Troy Wholesalers (seller) records for these three transactions.
Record the merchandise sold on account.
Record the cost of goods sold.
Record the sales return.
Record the cost of sales return.
Record the cash collected for credit sales.
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