Question 2

Crane Engineering Corporation purchased conveyor equipment with a list price of $48,200. Three independent cases that are related to the equipment follow. Assume that the equipment purchases are recorded gross.

1.		Geddes paid cash for the equipment 25 days after the purchase, along with 5% GST (recoverable) and provincial sales tax of $3,374, both based on the purchase price. The vendors credit terms were 2/10, n/30.
2.		Geddes traded in equipment with a book value of $2,400 (initial cost $39,300) and paid $40,000 in cash one month after the purchase. The old equipment could have been sold for $6,700 at the date of trade but was accepted for a trade-in allowance of $8,200 on the new equipment.
3.		Geddes gave the vendor a $10,200 cash down payment and a 11% note payable with blended principal and interest payments of $19,000 each, due at the end of each of the next two years.

Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. (a) Prepare the general journal entries to record the acquisition and the subsequent payment, including any notes payable, in each of the three independent cases above. For item 3, use a table, financial calculator, or Excel. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.)

Account Titles and Explanation Debit Credit 1. Equipment 48,200 Cash 47236 Purchase Discounts 964 (To record purchase of equipment on credit.) Accounts Payable 48,200 Accounts Payable 964 Purchase Discounts 964 48,200 Cash (To record payment to the vendor.) 2. Equipment Equipment Contributed Surplus Gain on Disposal of Equipn Accounts Payable (To record exchange of equipment.) (To record payment to the vendor.) 3. (To record purchase of equipment on credit.) First Payment on Note (To record payment to the vendor.) Second Payment on Note (To record payment to the vendor.)