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.
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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
To record acquisition of equipment.
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Cr.
Cr.
Transcribed Image Text:Case 2
Account Name
To record acquisition of equipment.
To record payment on account.
Case 3
Account Name
For Case 3, record the entry for (a) the purchase of equipment for cash and for (b) the payment of the note at maturity.
Note: Do not record the entry for issuance of the note.
To record acquisition of equipment.
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To record payment of note payable.
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Cr.
Dr.
Cr.
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