Question

Bonita Engineering Corporation purchased conveyor equipment with a list price of $9,400. Presented below are three independent cases related to the equipment.

(a)		Bonita 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)		Bonita traded in equipment with a book value of $2,000 (initial cost $8,600), and paid $10,400 in cash one month after the purchase. The old equipment could have been sold for $500 at the date of trade. (The exchange has commercial substance.)
(c)		Bonita gave the vendor a $11,200 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.

No.	Account Titles and Explanation	Debit	Credit
(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.)

(c)
	(To record the purchase of equipment with a note.)
	(To record the payment of the note.)

Answer 1

Journal Entry- Bonita Engineering Company
S. No.	Account Tittle	Debit	Credit
a)	Equipment	$9,400.00
	Accounts payable		$9,400.00
	To Record Equipment Purchased
	Accounts payable	$9,400.00
	Cash (bf)	$188.00
	Equipment (9400-9400*2%)		$9,212.00
	TO Record Payment made
b)	Equipment (New ) (10400+500)	$10,900.00
	Loss on Disposal of Equipment (2000-500)	$1,500.00
	Accumulated DepreciationEquipment (8600-2000)	$6,600.00
	Accounts Payable		$10,400.00
	Equipment (Old)		$8,600.00
	To Record Equipment Purchased
	Accounts Payable	$10,400.00
	Cash		$10,400.00
	TO Record Payment made
c)	Equipment (11200*0.91743)	$10,275.00
	Discount on Notes Payable (11200-10275)	$925.00
	Notes Payable		$11,200.00
	To Record Equipment Purchased
	Interest Expense	$925.00
	Notes Payable	$11,200.00
	Discount on Notes Payable		$925.00
	Cash		$11,200.00
	TO Record Payment made