Question

Cullumber Engineering Corporation purchased conveyor equipment with a list price of $52,200. Three independent cases that are related to the equipment follow. Assume that the equipment purchases are recorded gross.

1.		Geddes paid cash for the equipment 25 days after the purchase, along with 5% GST (recoverable) and provincial sales tax of $3,500, both based on the purchase price. The vendor’s credit terms were 2/10, n/30.
2.		Geddes traded in equipment with a book value of $2,100 (initial cost $40,200), and paid $40,800 in cash one month after the purchase. The old equipment could have been sold for $8,230 at the date of trade, but was accepted for a trade-in allowance of $9,200 on the new equipment.
3.		Geddes gave the vendor a $9,800 cash down payment and a 10% note payable with blended principal and interest payments of $15,300 each, due at the end of each of the next two years.

(a)

Prepare the general journal entries that are required to record the acquisition and the subsequent payment, including any notes payable, in each of the three independent cases above. For item 3, use tables, financial calculator, or Excel. (Credit account titles are automatically indented when the 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. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.)

	Account Titles and Explanation	Debit	Credit
1.
	(To record purchase of equipment on credit.)
	(To record payment to the vendor.)
2.
	(To record exchange of equipment.)
	(To record payment to the vendor.)
3.
	(To record purchase of equipment on credit.)
	First Payment on Note
	(To record payment to the vendor.)
	Second Payment on Note
	(To record payment to the vendor.)

Answer 1

1	Particular	Debit	Credit
	Equipment A/c	52200
	Provisional sales Tax	3500
	GST payable	2610
	To vendor		58310
	Vendor	58310
	To Bank		58310
2	New Assets	52200
	To Vendor		40800
	To Profit on sale of Fixed asset (B/F)		9300
	To old Assets (Book value)		2100
	Vendor A/c	40800
	To Bank		40800
3	Equipment A/c	71000
	To Bank		9800
	To 10% note payable		61200
	10% note payable	30600
	To Bank		30600
	(Payment made at the end of 1st Year)
	10% note payable	30600
	To Bank		30600
	(Payment made at the end of 2nd Year)