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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%. a. Journalize Ramsey’s entries to record: 1. the issuance of the note. 2. the payment of the note at maturity. b. Journalize Buckner’s entries to record: 1. the receipt of the note. 2. the receipt of the payment of the note at maturity.

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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Chapter
Section
BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 11, Problem 3E
Textbook Problem
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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

Journalize issuance of the note.

Explanation of Solution

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.

Journalize the entry to record the issuance of the note.

DateAccount Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

 Merchandise Inventory 793,000 
 Interest Expense (1) 7,000 
 Note Payable  800,000
 (To record the issuance of discounted notes for merchandise inventory)   

Table (1)

  • Merchandise Inventory is an asset and it is increased. So debit it by $793,000.
  • Interest Expense is a component of stockholders’ equity and decreased it. So, debit Interest Expense by $7,000...

a. 2

To determine

Journalize the payment of note at maturity.

b. 1

To determine

 Journalize receipts of notes.

b. 2

To determine

Journalize the receipts of payment of note at maturity.

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Chapter 11 Solutions

Financial Accounting
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