Recording Acquisition Costs Following are three separate cases. Case 1. Equipment with a list price of $36,000 is purchased on account; terms are 2/10, n/30. Payment is made within the discount period Case 2. Equipment with a list price of $24,000 is purchased on account; terms are 2/10, n/30. Payment is made after the discount period. Any purchase discounts lost are recorded as interest expense. Case 3. Equipment listed at $10,800 (less a 2% discount for cash purchases) is purchased for cash. To take advantage of this discount, the company simultaneously borrowed $9,600 from a bank by issuing a 60-day, 15% note, which is paid in full with interest at its maturity date. For Case 1 and Case 2, prepare journal entries for (a) equipment acquisition, and (b) cash payment. Case 1 Account Name To record acquisition of equipment. To record payment on account. Case 2 Account Name Dr. Dr. Cr. Cr.
Recording Acquisition Costs Following are three separate cases. Case 1. Equipment with a list price of $36,000 is purchased on account; terms are 2/10, n/30. Payment is made within the discount period Case 2. Equipment with a list price of $24,000 is purchased on account; terms are 2/10, n/30. Payment is made after the discount period. Any purchase discounts lost are recorded as interest expense. Case 3. Equipment listed at $10,800 (less a 2% discount for cash purchases) is purchased for cash. To take advantage of this discount, the company simultaneously borrowed $9,600 from a bank by issuing a 60-day, 15% note, which is paid in full with interest at its maturity date. For Case 1 and Case 2, prepare journal entries for (a) equipment acquisition, and (b) cash payment. Case 1 Account Name To record acquisition of equipment. To record payment on account. Case 2 Account Name Dr. Dr. Cr. Cr.
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter2: Asset And Liability Valuation And Income Recognition
Section: Chapter Questions
Problem 5QE
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