Question

Ramsey Company issues an $550,000, 45-day note to Buckner Company for merchandise inventory. Buckner discounts the note at 4%.

Required:

A.

Journalize Ramsey’s entries to record (refer to the company’s Chart of Accounts for exact wording of account titles):

1.	the issuance of the note on January 1.
2.	the payment of the note at maturity. Assume a 360-day year.

B.

Journalize Buckner’s entries to record (refer to the company’s Chart of Accounts for exact wording of account titles):

1.	the receipt of the note on January 1.
2.	the receipt of the payment of the note at maturity. Assume a 360-day year.

Journal-Ramsey

A.

Journalize Ramsey Enterprises’ entries to record (refer to the company’s Chart of Accounts for exact wording of account titles):

1.	the issuance of the note on January 1.
2.	the payment of the note at maturity. Assume a 360-day year and round amounts to the nearest whole dollar.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5

Journal-Buckner

B. Journalize Buckner Industries’ entries to record (refer to the company’s Chart of Accounts for exact wording of account titles):

1.	the receipt of the note on January 1.
2.	the receipt of the payment of the note at maturity. Assume a 360-day year and round amounts to the nearest whole dollar.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5

Answer 1

A]
1]	Merchandise inventory	$    5,50,000
	Notes payable		$   5,50,000
2]	Notes payable	$    5,50,000
	Interest expense (450000*4%*45/360)	$ 2,250
	Cash		$   5,52,250
B]
1]	Notes receivable	$    5,50,000
	Sales		$   5,50,000
2]	Cash	$    5,52,250
	Interest income (450000*4%*45/360)		$ 2,250
	Notes receivable		$   5,50,000