Question

Concord Engineering Corporation purchased conveyor equipment with a list price of $9,300. Presented below are three independent cases related to the equipment.

(a)		Concord 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)		Concord traded in equipment with a book value of $2,200 (initial cost $7,300), and paid $9,700 in cash one month after the purchase. The old equipment could have been sold for $400 at the date of trade. (The exchange has commercial substance.)
(c)		Concord gave the vendor a $11,900 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.)

Answer 1

Solution:

Event	Account title and explanation	Debit	Credit
a	Equipment	$9,300
	Account payable		$9,300
	(To record purchase of equipment on account)
	Accounts payable	$9,300
	Equipment ($9,300*2%)		$186
	Cash		$9,114
	(To record payment of accounts payable)
b	Accumulated depreciation ($7,200 -$2,200)	$51,00
	Loss on disposal of assets ($2,200-$400)	$1,800
	Equipment new($9,700+$400)	$10,100
	Equipment		$7,300
	Account payable		$9,700
	(To record purchase of equipment on exchange)
	Accounts payable	$7,300
	Cash		$7,300
	(To record payament of accounts payable)
c	Equipment ($11,900/109*100)	$10,917
	Discount on notes payable ($11,900-$10,917)	$983
	Notes payable		$11,900
	(To record purchase of equipment on account)
	Interest expenses	$983
	Notes payable	$11,900
	Discount on note payable		$983
	Cash		$11,900
	(To record payment of accounts payable)

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