1 answer

Martinez Engineering Corporation purchased conveyor equipment with a list price of $9,200. Presented below are three...

Question:

Martinez Engineering Corporation purchased conveyor equipment with a list price of $9,200. Presented below are three independ

Martinez Engineering Corporation purchased conveyor equipment with a list price of $9,200. Presented below are three independent cases related to the equipment. (a) Martinez 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. (6) Martinez traded in equipment with a book value of $2,200 (initial cost $7,400), and paid $9,800 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) Martinez gave the vendor a $11,000 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, eg. 1.25124 and final answers to decimal places, eg 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 for the amounts.) Debit Credit No. Account Titles and Explanation (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.) (0) (To record the purchase of equipment with a note.) (To record the payment of the note.)

Answers

Answer:

(a)

Particulars Debit ($) Credit ($)
Equipment $9,200
Accounts payable $9,200
( To record the purchase of equipment on account )
Accounts payable $9,200
Cash (9200-184) $9,016
Equipment (9200*2%) $184
( (To record the payment on account )

(b)

Particulars Debit ($) Credit ($)
Equipment (New ) (9800+300) $10,100
Loss on Disposal of Equipment (2200-300) $1,900
Accumulated Depreciation Equipment (7400-2200) $5,200
Accounts Payable $9,800
Equipment (Old) $7,400
(To record the purchase of equipment on account.)
Accounts Payable $9,800
Cash $9,800
(To record the payment on account.)

(c)

Particulars Debit ($) Credit ($)
Equipment (11000*0.91743) $10,091.73
Discount on Notes Payable (11000-10091.73) $908.27
Notes Payable $11,000
(To record the purchase of equipment with a note)
Interest Expense $10,091.73
Notes Payable $11,000
Discount on Notes Payable $10,091.73
Cash $11,000
(To record the payment of the note)
.

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