Beacon Co: prepare adjusting entries
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1. May 10, the company purchased goods from J co. for $90,000 terms 2/10 n/30. Purchases and AP are recorded at net amounts. Invoice paid May 18.
2. June 1, the company purchased equipment for $120,000 from Nolan co. paying $40,000 in cash and giving a one year, 9% note for balance.
3. September 30, the company discounted at 10% its $240,000, one year zero interest bearing note at First State Bank.
a) Prepare journal entries necessary to record the transactions above using appropriate dates
b) Prepare adjusting entries necessary at December 31, 2004 in order to properly report interest expense related to the above transactions assuming using straight-line amortization of discounts.
c) Indicate the manner in which the above transactions should be reflected in the Current Liabilities section of Beacon Company's December 31, 2004 balance sheet.
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1. May 10, the company purchased goods from J co. for $90,000 terms 2/10 n/30. Purchases and AP are recorded at net amounts. Invoice paid May 18.
2. June 1, the company purchased equipment for $120,000 from Nolan co. paying $40,000 in cash and giving a one year, 9% note for balance.
3. September 30, company discounted at 10% its $240,000, one year zero interest bearing note at First State Bank.
a) Prepare journal entries necessary to record the transactions above using appropriate dates
(1) The recording is at net amount. There is a discount of 2%, so the discount amount is 90,000X2%= 1,800 and the net amount is 90,000-1,800 = 88,200
The entry to record the purchase is
May 10 Purchases/Inventory Dr ................................................................... 88,200
Accounts Payable ...
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