Question

Tamarisk Engineering Corporation purchased conveyor equipment with a list price of $9,400. Presented below are three independent cases related to the equipment. (a) Tamarisk 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) Tamarisk traded in equipment with a book value of $2,000 (initial cost $7,800), and paid $8,900 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) Tamarisk gave the vendor a $11,700 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%.

Answer 1

Answer:

a) :-
			Particulars	Debit($)	Credit($)
Equipment	9,400
Accounts payable		9,400
( To record the puchase of equipment on account )
Accounts payable	9,400
Cash(9400-188)		9,212
Equipment(9400*2%)		188
(To record the payment on account )
(b) :-
			Particulars	Debit($)	Credit($)
Equipment (New )(8900+400)	9,300
Loss on Disposal of Equipment(2000-400)	1,600
Accumulated DepreciationEquipment(7800-2000)	5,800
Accounts Payable		8,900
Equipment (Old)		7,800
(To record the puchase of equipment on account.)
Accounts Payable	8,900
Cash		8,900
(To record the payment on account.)
(c) :-
			Particulars	Debit($)	Credit($)
Equipment(11700/1.09)	10,733.94
Discount on Notes Payable(11700-10733.94)	966.06
Notes Payable		11,700.00
(To record the puchase of equipment with a note)
Interest Expense	966.06
Notes Payable	11,700
Discount on Notes Payable		966.06
Cash		11,700
(To record the payment of the note)