Chapter 12, Problem 8PA

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.