Please show calculations Problem 153 Described below are certain transactions of

Question

Please show calculations Problem 153 Described below are certain transactions of Lamar Company for 2018: 1. On May 10, the company purchased goods from Fox Company for $73,700, terms 2/10, n/30. Purchases and accounts payable are recorded at net amounts. The invoice was paid on May 18. year, 9% note for the balance. Bank. 2. On June 1, the company purchased equipment for $91,200 from Rao Company, paying $33,600 in cash and giving a one 3. On September 30, the company discounted at 10% its $220,000, one-year zero-interest-bearing note at Virginia State Prepare the journal entries necessary to record the transactions above using appropriate dates. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit May 10 May 18 June 1 September 30

Explanation / Answer

Note : 2/10 , n/30 is a credit term which means if supplier is paid wihin 10 days of purchase then we get 2 % discount or else we have to pay 100 % of the amount payable within 30 days of purchase. Since for purchase on May 10, it is mentioned that the purchase & account payable to be recorded at net amount which means they are to be recorded at 98 % of purchase value.

Journal Entry

Date Accounts Titles & Explanation Debit ($) Credit ($) May 10 Purchase ($73,700 * 98 %) 72,226 Accounts Payable 72,226 May 18 Accounts Payable 72,226 Cash 72,226 June 1 Equipment 91,200 Cash 33,600 Notes Payable ($91,200 - $33,600) 57,600 September 30 Cash ($220,000 * 90 %) 198,000 Discount on Notes Payable 22,000 Notes Payable 220,000

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