Question

Ramsey Company issues an $535,000, 45-day note to Buckner Company for merchandise inventory. Buckner discounts the note at 4%. 

Required: 

A. Journalize Ramsey's entries to record (refer to the company's Chart of Accounts for exact wording of account titles):

 1. the issuance of the note on January 1.

 2. the payment of the note at maturity. Assume a 360-day year. 

B. Journalize Buckner's entries to record (refer to the company's Chart of Accounts for exact wording of account titles):

 1. the receipt of the note on January 1.

 2. the receipt of the payment of the note at maturity. Assume a 360-day year.

Answer 1

A)
Event	Accounting titles and Explanations	Debit	Credit
1	Merchandise inventory _ Bal. Fig.	$ 532,325
	Interest expense ( $ 535,000 x 45 / 360 x 4% )	$ 2,675
	Notes payable		$ 535,000
	(To record the issue of the note )
2	Notes payable	$ 535,000
	Cash		$ 535,000
	(To record the payment of the note at maturity )
B)
Event	Accounting titles and Explanations	Debit	Credit
1	Notes receivable	$ 535,000
	Sales		$ 532,325
	Interest revenue                 ( $ 535,000 x 45 / 360 x 4% )		$ 2,675
	(To record the receipt of the note )
2	Cash	$ 535,000
	Notes receivable		$ 535,000
	(To record the payment of the note at maturity )