The following are selected 2020 transactions of Stellar
Corporation.
Sept. 1 | Purchased inventory from Encino Company on account for $47,400. Stellar records purchases gross and uses a periodic inventory system. | |
Oct. 1 | Issued a $47,400, 12-month, 8% note to Encino in payment of account. | |
Oct. 1 | Borrowed $47,400 from the Shore Bank by signing a 12-month, zero-interest-bearing $52,040 note. |
Journal entry
Date | General Journal | Debit | Credit |
Sept 1 | Purchase | 47400 | |
Account payable | 47400 | ||
Oct 1 | Account payable | 47400 | |
Notes payable | 47400 | ||
Oct 1 | Cash | 47400 | |
Discount on notes payable | 4640 | ||
Notes payable | 52040 |
Adjusting entry
Date | General Journal | Debit | Credit |
Dec 31 | Interest expense (47400*8%*3/12) | 948 | |
Interest payable | 948 | ||
Dec 31 | Interest expense (4640/12*3) | 1160 | |
Discount on notes payable | 1160 | ||
c) Net Liability
1) The interest bearing note = 47400+948 = 48348
2) The zero interest bearing note = 47400+1160 = 48560
The following are selected 2020 transactions of Stellar Corporation. Sept. 1 Purchased inventory from Encino Company...
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