Answer:
1. February 2
Dr Purchases68,600
Cr Account payable 68,600
February 26
Dr Account payable 68,600
Dr Purchase Discount loss 1,400
Cr Cash 70,000
December 31
No adjustment necessary
2. April 1
Dr Trucks 50,000
Cr Cash 4,000
Cr Note payable 46,000
December 31
Dr Interest expenese 4,140
Cr Interest Payable 4,140
3. May 1
Dr Cash 83,000
Dr Discount on notes payable 9,000
Cr Notes payable 92,000
December 31
Dr Interest expense 6,000
Cr Discount on notes payable 6,000
4. Aug 1
Dr Dividend $300,000
Cr Dividend payable $300,000
Sept 10
Dr Dividend payable$300,000
Cr Cash $300,000
December 31
No adjustment necessary
Explanation:
Preparation of the journal entries
1. February 2
Dr Purchases68,600
[$70,000 * (100%-2%)]
Cr Account payable 68,600
February 26
Dr Account payable 68,600
Dr Purchase Discount loss 1,400
(70,000-68,600)
Cr Cash 70,000
December 31
No adjustment necessary
2. April 1
Dr Trucks 50,000
Cr Cash 4,000
Cr Note payable 46,000
(50,000-4,000)
December 31
Dr Interest expenese 4,140
Cr Interest Payable 4,140
($46,000* 12% * 9/12 = $4,140)
3. May 1
Dr Cash 83,000
Dr Discount on notes payable 9,000
Cr Notes payable 92,000
December 31
Dr Interest expense 6,000
Cr Discount on notes payable 6,000
($9,000 * 8/12 (STRAIGHT-LINE) = $6,000)
4. Aug 1
Dr Dividend $300,000
Cr Dividend payable $300,000
Sept 10
Dr Dividend payable$300,000
Cr Cash $300,000
December 31
No adjustment necessary
