Question

Following are three separate cases. Case 1. Equipment with a list price of $36,000 is purchased on account; terms are 2/10,n/30. Payment is made within the discount period. Case 2. Equipment with a list price of $24,000 is purchased on account, terms are 2/10,n/30. Payment is made after the discount period. Any purchase discounts lost are recorded as interest expense. Case 3. Equipment listed at $10,800 (less a 2% discount for cash purchases) is purchased for cash. To take advantage of this discount, the company simultaneously borrowed $9,600 from a bank by issuing a 60 -day, 15% note, which is paid in full with interest at its maturity date. For Case 1 and Case 2, prepare journal entries for (a) equipment acquisition, and (b) cash payment. For Case 3, record the entry for (a) the purchase of equipment for cash and for (b) the payment of the note at maturity. Note: Do not record the entry for issuance of the note.

Answer 1

This answer provides journal entries for equipment acquisition and cash payment in three different cases involving different terms and conditions.

Step-by-step explanation:

Case 1:

1. Equipment acquisition:
2. Debit: Equipment $36,000
3. 
   
4. 
   
5. Credit: Accounts Payable $36,000
6. Cash payment:
7. Debit: Accounts Payable $36,000 - 2% discount $720
8. 
   
9. 
   
10. Credit: Cash $35,280

Case 2:

1. Equipment acquisition:
2. Debit: Equipment $24,000
3. 
   
4. 
   
5. Credit: Accounts Payable $24,000
6. Cash payment:
7. Debit: Accounts Payable $24,000
8. 
   
9. 
   
10. Credit: Cash $24,000 + 2% interest $480

Case 3: