Question

Exercise 10-11 Whispering Engineering Corporation purchased conveyor equipment with a list price of $9,600. 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 $1,800 (initial cost $8,800), and paid $8,600 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) Whispering gave the vendor a $9,900 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

Whispering Engineering Corporation
Journal Entries
Date	Accounting Titles andExplanation	Amount ($)	Amount ($)
a)         1	Equipment	9,600
	Accounts Payable		9,600
	(To record Equipment purchased on Account)
2	Accounts Payable	9,600
	Cash		9,408
	Equipment		192
	($9600*2%)
	(To record payment on Account)
b          1	Equipment(New)	9,100
	Loss on Disposal of Equipment	1,300
	($1800-$500)
	Accumulated Depreciation Equipment	7,000
	Accounts Payable		8,600
	Equipment (Old)		8,800
	(To record Equipment purchased on Account)
2	Accounts Payable	8,600
	Cash		8,600
	To record payment on Account
c          1	Equipment	9,009
	Discount on Notes Payable	891
	Notes Payable		9,900
	To record purchase of Equipment with note
2	Interest expense	891
	Notes Payable	9,900
	Discount on Notes Payable		891
	Cash		9,900
	To record payment of note