Question

Question 12 Sheridan Engineering Corporation purchased conveyor equipment with a list price of $ 10,900. Presented below are three independent cases related to the equipment. (a) Sheridan 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) Sheridan traded in equipment with a book value of $2,200 (initial cost $7,300), and paid $8,700 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) Sheridan gave the vendor a $11,500 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, e.g.1.25124 and final answers to 0 decimal places, e.g. 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 0 for the amounts.) No. Account Titles and Explanation Debit Credit To record the purchase of equipment on account.) To record the payment on account.) To record the purchase of equipment on account.)

Answer 1

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Event	Account	Debit	Credit
a	Equipment	$ 10,900
	Accounts Payable		$ 10,900
	(to record purchase of equipment on account)
	Accounts Payable	$ 10,900
	Equipment		$       218	Discount of 2%
	Cash		$ 10,682
	(to record the payment on account)
b	Equipment	$    9,100		Plug in
	Accumulated Deprciation	$    5,100		7300-2200
	Loss on Disposal of Equipment	$    1,800		2200 Book Value-400 Price
	Equipment-Old		$    7,300	Initial Cost
	Accounts Payable		$    8,700
	(to record purchase of equipment on account)
	Accounts Payable	$    8,700
	Cash		$    8,700
	(to record the payment on account)
c	Equipment	$ 10,550		11500-950 or 11500*0.91743
	Discounts on Note Payable	$       950		11500/109*9
	Note Payable		$ 11,500
	(to record purchase of equipment on account)
	Interest Expense	$       950
	Note Payable	$ 11,500
	Discounts on Note Payable		$       950
	Cash		$ 11,500
	(to record the payment on account)