Question

Described below are certain transactions of Crane Company for 2021:

Answer 1

Answer and Explanation:

a. The journal entries are shown below:

On May 10

Merchandise inventory Dr  $75,924   ($76,800 × 0.98)

         To Account payable $75,924

(Being merchandise inventory is purchased on account)

For recording this we debited the merchandise inventory as it increased the assets and credited the account payable as it also increased the liabilities

On May 18

Account payable Dr

        To Cash

(Being the cash paid is recorded)

For recording this we debited the account payable as it decreased the liabilities and credited the cash as it reduced the assets

2. On June 1

Equipment Dr $94,800

          To cash Dr $33,600

          To 9% Note payable $61,200

(Being the equipment is purchased on cash and note payable)

For recording this we debited the equipment as it increased the assets and credited the account payable and cash as it also increased the liabilities and reduced the assets

3. On Sep 30

Cash Dr $180,000

   Discount on note payable $20,000

                   To Note payable $200,000

(Being the interest bearing note is recorded)

For recording this we debited the cash as it increased the assets and credited the note payable as it also increased the liabilities and the difference is debited to note payable