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Serene Company purchases fountains for its inventory from Kirkland Inc. The following transactions take place during the current year. A. On July 3, the company purchases thirty fountains for $1,200 per fountain, on credit. Terms of the purchase are 2/10, n/30, invoice dated July 3. B. On August 3, Serene does not pay the amount due and renegotiates with Kirkland. Kirkland agrees to convert the debt owed into a short-term note, with an 8% annual interest rate, payable in two months from August 3. C. On October 3, Serene Company pays its account in full. Record the journal entries to recognize the initial purchase, the conversion, and the payment.

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Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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FindFindarrow_forward

Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 12, Problem 8PA
Textbook Problem
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Serene Company purchases fountains for its inventory from Kirkland Inc. The following transactions take place during the current year.

A. On July 3, the company purchases thirty fountains for $1,200 per fountain, on credit. Terms of the purchase are 2/10, n/30, invoice dated July 3.

B. On August 3, Serene does not pay the amount due and renegotiates with Kirkland. Kirkland agrees to convert the debt owed into a short-term note, with an 8% annual interest rate, payable in two months from August 3.

C. On October 3, Serene Company pays its account in full.

Record the journal entries to recognize the initial purchase, the conversion, and the payment.

To determine

Concept introduction:

Journal Entry: A company records all the monetary business transactions in the form of journal entries. The transactions are recorded by debiting and crediting one or more account, which lead to the same total of debit and credit columns.

To prepare:

Journal entries in the books of company.

Explanation of Solution

A. Company purchases fountains of 36000(1200*30) so in this case company debited the purchases by 36000 and credited the accounts payable by 36000.

B. Company accepts a bills payable of 36000 in which company debited the account...

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Chapter 12 Solutions

Principles of Accounting Volume 1
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