Question

Described below are certain transactions of Pina Corporation. The company uses the periodic inventory system. 1. On February 2, the corporation purchased goods from Martin Company for $63,300 subject to cash discount terms of 2/10, n/30. Purchases and accounts payable are recorded by the corporation at net amounts after cash discounts. The invoice was paid on February 26. 2. On April 1, the corporation bought a truck for $52,000 from General Motors Company, paying $3,000 in cash and signing a one-year, 10% note for the balance of the purchase price. 3. On May 1, the corporation borrowed $82,900 from Chicago National Bank by signing a $92,500 zero-interest-bearing note due one year from May 1. 4. On August 1, the board of directors declared a $280,000 cash dividend that was payable on September 10 to stockholders of record on August 31.

Answer 1

Question: From the details given, make all the journal entries necessary to record the transactions above using appropriate dates.

Pina Corporation

Journal Entries

Date Details Debit Credit

$ $

February 2 Purchases 62,034

Accounts Payable 62,034

Being credit purchase of goods at discount of 2%

February 26 Accounts Payable 62,034

Purchase - Discount 1,266

Cash 63,300

Being payment made for goods purchased

April 1 Vehicle 52,000

Cash 3,000

10% 1-year Note payable 49,000

Being purchase of vehicle by part cash, part note-payable

May 1 Cash 82,900

Note Payable - Discount 9,600

1-year Note payable 92,500

Being borrowing from bank

August 1 Dividend 280,000

Dividend Payable 280,000

Being dividend declared, not yet paid

September 10 Dividend Payable 280,000

Cash 280,000

Being cash payment of dividend

Step-by-step explanation:

a) 2/10, n/30 means that the buyer is to pay within 30 days but is entitled to 2% discount if the purchase is paid for in 10 days. Since Pina records at net amounts after cash discount

To record this purchase = 63,300 * 0.02 = 1,266

= 63,300 - 1266 = $62,034

b) Since payment was made on 26th, it means the 10 day discount was not utilized hence Pina pays full price for the goods