Answer:
James Co.
Journal Entries:
June 1:
Debit Inventory $90,000
Credit Accounts Payable (O'Leary Co.) $90,000
To record the purchase of merchandise on account, terms, n/30.
June 30:
Debit Accounts Payable (O'Leary Co.) $90,000
Credit Notes Payable (O'Leary Co.) $90,000
To record the issue of a 60-day, 5% note.
August 29:
Debit Notes Payable (O'Leary Co.) $90,000
Debit Interest on Notes $750
Credit Cash Account $90,750
To record the payment of the notes plus interest.
Explanation:
a) Data and Calculations:
Interest computations based on 360-day year
Interest on Notes = $750 ($90,000 * 5% * 60/360)
Inventory purchased on June 1 = $90,000
Interest on note = 5%
Payment of note = August 29
