Question

i need help answering this

Problem 10-2A Asset purchased with a note LO2,3 SOLATA Quebec Construction Company purchased some equipment on September 10, 2020, that had a cost of $190,000 (ignore GST/PST). Show the journal that would record this purchase and payment under these three separate situations: a. The company paid cash for the full purchase price. b. The company purchased the equipment on credit with terms 1/30, n/60. Payment was made on October 9, 2020. c. The company signed a 12%, one-year note for the full purchase price. The note was paid on September 10, 2021, the maturity date. Ignore year-end accruals. Analysis Component: What would the impact be on the financial statement at year-end if the company signed a note? What ratio would be affected? 735

Answer 1

a)

Equipment a/c Dr		$190000
To Cash			$190000
Equipment purchased by cash

b)

Equipment		$190000
To Accounts Payable			$190000
Equipment purchased on credit

c)

Equipment		$190000
To 12% Notes Payable			$190000
Equipment purchased by Notes Payable
12% Notes Payable		$190000
To Cash			$190000
12%Notes Payable is paid

When the note is signed by the company then there will be a transfer of liability from accounts payable to notes payable.