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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Entries for discounting notes payable

Ramsey Company issues an $800,000, 45-day note to Buckner Company for merchandise inventory. Buckner discounts the note at 7%.

  1. a. journalize Ramsey's entries to record:
    1. 1. the issuance of the note.
    2. 2. the payment of the note -at maturity.
  2. b. journalize Buckner's entries to record:
    1. 1. the receipt of the note.
    2. 2. the receipt of the payment of the note at maturity.

a. 1

To determine

Note Payable: Note payable is an obligation of the business to pay to its creditors, in future for the benefits received that carry some interest.

To journalize: Issuance of the note.

Explanation

Working note:

Calculate the amount of interest expense.

Interest Expense = Note Payable×Interest Percentage×Interesttimeperiods                          = $800,000×7

b. 2

To determine

To journalize: The receipts of payment of note at maturity.

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