Question

Oriole Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2017. The terms of acquisition for each truck are described below.

1.		Truck #1 has a list price of $25,950 and is acquired for a cash payment of $24,047.
2.		Truck #2 has a list price of $27,680 and is acquired for a down payment of $3,460 cash and a zero-interest-bearing note with a face amount of $24,220. The note is due April 1, 2018. Oriole 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 $27,680. It is acquired in exchange for a computer system that Oriole carries in inventory. The computer system cost $20,760 and is normally sold by Oriole for $26,296. Oriole uses a perpetual inventory system.
4.		Truck #4 has a list price of $24,220. It is acquired in exchange for 950 shares of common stock in Oriole 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 Oriole Corporation.

Answer 1

Solution:-

Item	Account title and explanation	Debit	Credit
#1	Trucks	24,047
	Cash		24,047
#2	Trucks {(16,220 * 0.90909) + 3,460}	18,205.44
	Discount on notes payable	9,474.56
	Cash		3,460
	Notes payable		24,220
#3	Truks	26,296
	Cost of goods sold	20,760
	Inventory		20,760
	Sales revenue		26,296
#4	Truks (950 * 13)	12,350
	Common stock (950 * 10)		9,500
	Paid in capital in excess of par-common stock		2,850

Please Rate or comment if you have any doubt regarding this solution.