Question

Sage Engineering Corporation purchased conveyor equipment with a list price of $10,900. Presented below are three independent cases related to the equipment.

(a)		Sage 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)		Sage traded in equipment with a book value of $2,000 (initial cost $8,200), and paid $9,200 in cash one month after the purchase. The old equipment could have been sold for $300 at the date of trade. (The exchange has commercial substance.)
(c)		Sage gave the vendor a $10,400 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.)

Answer 1

Answer:

a) :-
			Particulars	Debit($)	Credit($)
Equipment	10,900
Accounts payable		10,900
( To record the puchase of equipment on account )
Accounts payable	10,900
Cash(10900-218)		10,682
Equipment(10900*2%)		218
(To record the payment on account )
(b) :-
			Particulars	Debit	Credit
Equipment (New )(9200+300)	9,500
Loss on Disposal of Equipment(2000-300)	1,700
Accumulated DepreciationEquipment(8200-2000)	6,200
Accounts Payable		9,200
Equipment (Old)		8,200
(To record the puchase of equipment on account.)
Accounts Payable	9,200
Cash		9,200
(To record the payment on account.)
(c) :-
			Particulars	Debit	Credit
Equipment(10400*.9174)	9,540.96
Discount on Notes Payable(10400-9540.96)	859.04
Notes Payable		10,400
(To record the puchase of equipment with a note)
Interest Expense	859.04
Notes Payable	10,400
Discount on Notes Payable		859
Cash		10,400
(To record the payment of the note)