Question
Indigo Engineering Corporation purchased conveyor equipment with a list price of $9,800. Presented below are three independent cases related to the equipment. (a) Indigo paid
Indigo Engineering Corporation purchased conveyor equipment with a list price of $9,800. Presented below are three independent cases related to the equipment. (a) Indigo paid cash for the equipment 8 days after the purchase. The vendors credit terms are 2/10, n/30. Assume that equipment purchases are initially recorded gross. (b) Indigo traded in equipment with a book value of $2,000 (initial cost $8,100), and paid $8,500 in cash one month after the purchase. The old equipment could have been sold for $400 at the date of trade. (The exchange has commercial substance.) (c) Indigo gave the vendor a $9,800 zero-interest-bearing note for the equipment on the date of purchase. The note was due in one year and was paid on time. Assume that the effective-interest rate in the market was 10%. Prepare the general journal entries required to record the acquisition and payment in each of the independent cases above. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered.
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