Important information about Accounts and Notes Payable
Not what you're looking for?
Described below are certain transactions of Carson Company for 2007:
1. On May 10, the company purchased goods from Jay Company for $50,000, terms 2/10, n/30. Purchases and accounts payable are recorded at net amounts. The invoice was paid on May 18.
2. On June 1, the company purchased equipment for $60,000 from Nolan Company, paying $20,000 in cash and giving a one-year, 9% note for the balance.
3. On September 30, the company discounted at 10% its $120,000, one-year zero-interest-bearing note at First State Bank.
Instructions
(a) Prepare the journal entries necessary to record the transactions above using appropriate dates.
(b) Prepare the adjusting entries necessary at December 31, 2007 in order to properly report interest expense related to the above transactions. Assume straight-line amortization of discounts.
(c) Indicate the manner in which the above transactions should be reflected in the Current Liabilities section of Carson Company's December 31, 2007 balance sheet.
hide problem
Purchase this Solution
Solution Summary
The solution explains journal entries for transactions relating to accounts and notes payable
Solution Preview
(a) Prepare the journal entries necessary to record the transactions above using appropriate dates.
The amount is 50,000 and there is a discount of 2% under the terms 2/10, n30. The net amount is 50,000X.98=49,000. The entry is
May 10 Merchandise Inventory Dr 49,000
Accounts Payable Cr 49,000
May 18 Accounts Payable Dr 49,000
Cash 49,000
Since the payment is made in 10 days, the discount is applicable
The entry for June 1 is
June 1 ...
Purchase this Solution
Free BrainMass Quizzes
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Writing Business Plans
This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.