Recording Acquisition Costs

Following are three separate cases.

Case 1. Equipment with a list price of $54,000 is purchased on account; terms are 2/10, n/30. Payment is made within the discount period.

Case 2. Equipment with a list price of $36,000 is purchased on account; terms are 2/10, n/30. Payment is made after the discount period. Any purchase discounts lost are recorded as interest expense.

Case 3. Equipment listed at $16,200 (less a 2% discount for cash purchases) is purchased for cash. To take advantage of this discount, the company simultaneously borrowed $14,400 from a bank by issuing a 60-day, 15% note, which is paid in full with interest at its maturity date.

For Case 1 and Case 2, prepare journal entries for (a) equipment acquisition, and (b) cash payment.

Case 1

Account NameDr.Cr.a. Answer Answer To record acquisition of equipment. b. Answer Answer To record payment on account.

Case 2

Account NameDr.Cr.a. Answer Answer To record acquisition of equipment. b. Answer Answer Answer

For Case 3, record the entry for (a) the purchase of equipment for cash and for (b) the payment of the note at maturity. Note: Do not record the entry for issuance of the note.

Case 3

Account NameDr.Cr.a. Answer Answer To record acquisition of equipment. b. Answer Answer Answer To record payment of note payable