Question

The following are selected 2020 transactions of Astin Corporation.

Sept. 1 Purchased inventory from Encino Company on account for $50,000. Astin records purchases gross and uses a periodic inventory system.
Oct. 1 Issued a $50,000, 12-month, 8% note to Encino in payment of account.
Oct. 1 Borrowed $50,000 from the Shore Bank by signing a 12-month, zero-interest-bearing $54,000 note.
Prepare journal entries for the selected transactions above. (If no entry is required, select "No Entry" for the account titles and enter o for the amounts.

Answer 1

Answer and Explanation:

The journal entries are shown below;

On Sept. 1

Purchases $50,000

To Accounts Payable $50,000

(being the purchase is recorded)

On Oct. 1

Accounts Payable $50,000

To Notes Payable $50,000

(being issuance is recorded)

Oct. 1

Cash $50,000

Discount on Notes Payable ($54,000 - $50,000) $4,000

To Notes Payable $54,000

(being the borrowed is recorded)