Question

Whispering Engineering Corporation purchased conveyor equipment with a list price of $10,900. Presented below are three independent cases related to the equipment. (a) Whispering paid cash for the equipment 8 days after the purchase. The vendor’s credit terms are 2/10, n/30. Assume that equipment purchases are initially recorded gross. (b) Whispering traded in equipment with a book value of $2,000 (initial cost $8,200), and paid $9,200 in cash one month after the purchase. The old equipment could have been sold for $300 at the date of trade. (The exchange has commercial substance.) (c) Whispering gave the vendor a $10,400 zero-interest-bearing note for the equipment on the date of purchase. The note was due in one year and was paid on time. Assume that the effective-interest rate in the market was 9%. Prepare the general journal entries required to record the acquisition and payment in each of the independent cases above. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No. Account Titles and Explanation Debit Credit (a) (To record the purchase of equipment on account.) (To record the payment on account.) (b) (To record the purchase of equipment on account.) (To record the payment on account.) (c) (To record the purchase of equipment with a note.) (To record the payment of the note.)

Answer 1

	Answer 1
No	Account Titles and Explanation	Debit	Credit
A	Conveyor equipment	10,900
	Accounts payable		10,900
	(To record the purchase of equipment on account.)
	Accounts payable	10,900
	Cash (10900-218)		10,682
	Conveyor equipment (10900*2%)		218
	(To record the payment on account.)
	Answer 2
No	Account Titles and Explanation	Debit	Credit
B	New Equipment (Balancing figure)	9,500
	Loss on sale of equipment (2000-300)	1,700
	Accumulated Depreciation (8200-2000)	6,200
	Accounts payable		9,200
	Old Equipment		8,200
	(To record the purchase of equipment on account.)
	Accounts payable	9,200
	Cash (10900-218)		9,200
	(To record the payment on account.)
	Answer 3
No	Account Titles and Explanation	Debit	Credit
C	Equipment (10400/1.09)	9,541
	Discount on notes payable (10400-9541)	859
	Notes payable		10,400
	(To record the purchase of equipment with a note.)
	Interest expense	859
	Notes payable	10,400
	Discount on notes payable		859
	Notes payable		10,400
	(To record the payment of the note.)