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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Rescue Sequences LLC purchased inventory by issuing a $30,000, 10%, 60-day note on October 1. Prepare the journal entries for Rescue Sequences to record the purchase and payment assuming it uses a perpetual inventory system and a 360-day calendar fiscal year. Rescue Sequences LLC uses a perpetual inventory system.

To determine

Prepare journal entry to record the given transactions by assuming the perpetual inventory system and 360- day calendar fiscal year.

Explanation

Liabilities:

The claims creditors have over assets or resources of a company are referred to as liabilities. These are the debt obligations owed by company to creditors. Liabilities are classified on the balance sheet as current liabilities and long-term liabilities.

Prepare journal entry to record the given transactions by assuming the perpetual inventory system and 360- day calendar fiscal year.

DateAccount Titles and explanationDebit ($)Credit ($)
October 1Inventory 30,000 
      Notes payable  30,000
 (To record purchase of  inventory on credit)  

Table (1)

  • Inventory is an asset and there is an increase in the value of an asset. Hence, debit the inventory by $30,000.
  • Notes payable is a liability and there is an increase in the value of liability. Hence, credit the notes payable by $30,000.
DateAccount Titles and explanationDebit ($)Credit ($)
December 31Notes payable 30,000 
 Interest expense (1)500 ...

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