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    Accounts & Notes payable - journal entries

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    Described below are certain transactions of Jackson Company for 2007:

    a. On May 10, the company purchased goods from Hickory Company for $55,000, terms 2/10, n/30. Purchases and accounts payable are recorded at gross amounts. The invoice was paid on May 18. Jackson uses the periodic method for inventory purchases.

    b. On June 1, the company purchased equipment for $60,000 from North Land Company, paying $20,000 in cash and giving a one-year, 8% note for the balance.

    c. On September 30, the company discounted at 10% its $150,000, one year zero-interest bearing note at Gary National Bank.

    1. Prepare the journal entries necessary to record the transactions above using the appropriate dates.

    2. Prepare the adjusting entries necessary at Dec. 31, 2007 in order to properly report interest expense related to the above transactions. Assume straight-line amortization of discounts.

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    Solution Preview

    Described below are certain transactions of Jackson Company for 2007:

    a. On May 10, the company purchased goods from Hickory Company for $55,000, terms 2/10, n/30. Purchases and accounts payable are recorded at gross amounts. The invoice was paid on May 18. Jackson uses the periodic method for inventory purchases.

    The terms give a 2% discount. The discount amount is 55,000X2%=1,100. The journal entries are
    May 10 Purchases Dr 55,000
    Accounts Payable Cr 55,000

    May 18 Accounts Payable Cr ...

    Solution Summary

    The solution explains journal entries for accounts and notes payable and the related adjusting entries

    $2.19