Question
Described below are certain transactions of Edwardson Corporation. The company uses the periodic inventory system. 1. On February 2, the corporation purchased goods from Martin
Described below are certain transactions of Edwardson Corporation. The company uses the periodic inventory system.
1. | On February 2, the corporation purchased goods from Martin Company for $77,300 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 $54,000 from General Motors Company, paying $3,000 in cash and signing a one-year, 12% note for the balance of the purchase price. | |
3. | On May 1, the corporation borrowed $112,800 from Chicago National Bank by signing a $122,160 zero-interest-bearing note due one year from May 1. | |
4 | On August 1, the board of directors declared a $319,100 cash dividend that was payable on September 10 to stockholders of record on August 31. (a) February 2 Purchases ($70,000 X 98%) Accounts Payable
February 26 Accounts Payable Purchase Discounts Lost Cash
April 1 Trucks Cash Notes Payable
May 1 Cash Discount on Notes Payable Notes Payable
August 1 Retained Earnings (Dividends) Dividends Payable
September 10 Dividends Payable Cash
(b) December 31 1. No adjustment necessary
2. Interest Expense ($46,000 X 12% X 9/12) Interest Payable
3. Interest Expense ($9,000 X 8/12) Discount on Notes Payable 4. No adjustment necessary |
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