Question

Blossom Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2020. The terms of acquisition for each truck are described below. 1. Truck

Answer 1

Modified Question  Blossom Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2020. The terms of acquisition for each truck are described below.  1. Truck #1 has a list price of $15,000 and is acquired for a cash payment of $13,900.   2. Truck #2 has a list price of $16,000 and is acquired for a down payment of $2,000 cash and a zero- interest-bearing note with a face amount of $14,000. The note is due April 1, 2021.  Blossom would normally have to pay interest at a rate of 10% for such a borrowing, and the dealership has an incremental borrowing rate of 8%.   3. Truck #3 has a list price of $16,000. It is acquired in exchange for a computer system that Blossom carries in inventory. The computer system cost $12,000 and is normally sold by Blossom for $15,200. Blossom uses a perpetual inventory system.   4.Truck #4 has a list price of $14,000. It is acquired in exchange for 1,000 shares of common stock in Blossom Corporation. The stock has a par value per share of $10 and a market price of $13 per share. Prepare the appropriate journal entries for the above transactions for Blossom Corporation.  

Answer

Journal Entries Account------Debit DB -------Credit CR

1. Trucks---------- 13900 (DB)  Cash------------------13900 (CR)
2. Trucks-----------16000 (DB)  Cash ------------------2000 (CR) Notes Payable----14000  (CR) 
3. Trucks--------------------15200 (DB) Cost of Goods Sold------12000 (DB) Inventory--------------------12000 (CR)  Sales---------------------------15200 (CR)  
4. Truck-----------------------13000 (DB) Common Stock--------------1000 (CR) Paid in Capital----------------3000 (CR)

Items tagged CR are under CREDIT Column while Items tagged DB are under DEBIT Column