Question

Exercise 10-11 Coronado Engineering Corporation purchased conveyor equipment with a list price of $9,300. Presented below are three independent cases related to the equipment.

(a) Coronado paid cash for the equipment 8 days after the purchase. The vendor’s credit terms are 2/10, n/30. Assume that equipment purchases are initially recorded gross. (b) Coronado traded in equipment with a book value of $2,100 (initial cost $8,100), and paid $10,400 in cash one month after the purchase. The old equipment could have been sold for $400 at the date of trade. (The exchange has commercial substance.) (c) Coronado gave the vendor a $11,000 zero-interest-bearing note for the equipment on the date of purchase. The note was due in one year and was paid on time. Assume that the effective-interest rate in the market was 9%.

Prepare the general journal entries required to record the acquisition and payment in each of the independent cases above. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

S.no	General Journal	Debit	Credit
a	Equipment	9,300
	Accounts payable		9,300
	Accounts payable	9,300
	Cash		9,114
	Equipment 9300*.02		186
b	Equipment (new) 10,400+400	10800
	Accumulated depreciation 8100-2100	6000
	Loss on disposal of equipment 2100-400	1700
	Accounts payable		10400
	Equipment (old)		8100
c	Equipment 11000/1.09	10092
	Discount on note payable	908
	Note payable		11,000
	Note payable	11,000
	Interest Expense	908
	Cash		11,000
	Discount on note payable		908