Question

Described below are certain transactions of Sunland Company for 2021: 1. On May 10, the company purchased goods from Fox Company for $72,200, terms 2/10, n/30. Purchases and accounts payable are recorded at net amounts. The invoice was paid on May 18. 2. On June 1, the company purchased equipment for $91,200 from Rao Company, paying $26,400 in cash and giving a one-year, 9% note for the balance. 3. On September 30, the company discounted at 11% its $200,000, one-year zero-interest-bearing note at Virginia State Bank, receiving $180,000. Prepare the journal entries necessary to record the transactions above using appropriate dates. Company uses the periodic inventory system. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit May 10 May 18 June 1 September 30 Prepare the adjusting entries necessary at December 31, 2021 in order to properly report interest expense related to the above transactions. Assume straight-line amortization of discounts. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31 (To record interest expense) Dec. 31 (To record amortization of discount) Indicate the manner in which the above transactions should be reflected in the Current Liabilities section of Sunland Company's December 31, 2021 balance sheet. Current Liabilities $ Interest Payable $ Interest Receivable Premium on Note $ Discount on Note Note Payable-Rao Company Indicate the manner in which the above transactions should be reflected in the Current Liabilities section of Sunland Company's December 31, 2021 balance sheet. Current Liabilities Less OF ACCOUNTS Add LINK TO TEXT

Answer 1

Answer:

May 10 : Purchases (Dr.) $70,756 (72,200 * 98%)

Accounts Payable (Cr.) $70,756

May 18: Accounts Payable (Dr.) $70,756

Cash (Cr.) $70,756

June 1: Equipment (Dr.) $91,200

Cash (Cr.) $26,400

Notes payable (Cr.) $64,800

Sep 30: Cash (Dr.) $180,000

Discount on notes payable (Dr.) $20,000

Notes Payable (Cr.) $200,000

Explanation:

Sunland company has incurred the transaction for its business activities. The purchase of supplies is made on account with a 2% discount if the payment is made within 10 days. This discount is availed by the company and payment is made on may 18th. Equipment is purchased with hybrid transaction which means partial cash payment is made and rest is paid through signing notes payable.