Question

Larkspur Engineering Corporation purchased conveyor equipment with a list price of $10,300. Presented below are three independent cases related to the equipment.

(a)		Larkspur 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)		Larkspur traded in equipment with a book value of $2,200 (initial cost $8,100), and paid $9,300 in cash one month after the purchase. The old equipment could have been sold for $500 at the date of trade. (The exchange has commercial substance.)
(c)		Larkspur gave the vendor a $11,100 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
(a) :-
Particulars	Debit	Credit
Equipment	$     10,300
Accounts payable		$10,300
( To record the puchase of equipment on account )
Accounts payable	$     10,300
Cash		$10,094	10300-206
Equipment		$     206	10300*2%
( (To record the payment on account )
(b) :-
Particulars	Debit	Credit
Equipment (New )	$       9,800		9300+500
Loss on Disposal of Equipment	$       1,700		2200-500
Accumulated DepreciationEquipment	$       5,900		8100-2200
Accounts Payable		$ 9,300
Equipment (Old)		$ 8,100
(To record the puchase of equipment on account.)
Accounts Payable	$       9,300
Cash		$ 9,300
(To record the payment on account.)
(c) :-
Particulars	Debit	Credit
Equipment	$10,183.47		11100*0.91743
Discount on Notes Payable	$     916.53		11100-10183.47
Notes Payable		$11,100
(To record the puchase of equipment with a note)
Interest Expense	$     916.53
Notes Payable	$     11,100
Discount on Notes Payable		$916.53
Cash		$11,100
(To record the payment of the note)