Question

Described below are certain transactions of Pharoah Company for 2021:

1. On May 10, the company purchased goods from Fox Company for $77,800, 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 $87,600 from Rao Company, paying $24,000 in cash and giving a one-year, 9% note for the balance.
3. On September 30, the company discounted at 11% its $180,000, one-year zero-interest-bearing note at Virginia State Bank, receiving $162,000.

Required:
Prepare the journal entries necessary to record the transactions above using appropriate dates.

Answer 1

May 10, 2021

Dr Purchases/Inventory $76,244

Cr Accounts Payable $76,244

May 18, 2021

Dr Accounts Payable $76,244

Cr Cash $76,244

June 1, 2021

Dr Equipment $87,600

Cr Cash $24,000

Cr Notes Payable $63,600

September 30, 2021

Dr Cash $162,000

Dr Discount on Notes Payable $18,000

Cr Notes Payable $180,000

Step-by-step explanation:

Preparation of the journal entries necessary to record the transactions above using appropriate dates

May 10, 2021

Dr Purchases/Inventory $76,244

Cr Accounts Payable $76,244

[$77,800-(2%*$77,800)]

May 18, 2021

Dr Accounts Payable $76,244

Cr Cash $76,244

[$77,800-(2%*$77,800)]

June 1, 2021

Dr Equipment $87,600

Cr Cash $24,000

Cr Notes Payable $63,600

($87,600-$24,000)

September 30, 2021

Dr Cash $162,000

Dr Discount on Notes Payable $18,000

($180,000-$162,000)

Cr Notes Payable $180,000