Exercise 10-3 Buffalo Corporation operates a retail computer store. To improve d

Question

Exercise 10-3

Buffalo Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2017. The terms of acquisition for each truck are described below.

Prepare the appropriate journal entries for the above transactions for Buffalo Corporation. (Round present value factors to 5 decimal places, e.g. 0.52587 and final answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when 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.)

List of Accounts

Accounts Payable
Accumulated Depreciation-Building
Accumulated Depreciation-Equipment
Accumulated Depreciation-Machinery
Accumulated Depreciation-Trucks
Buildings
Cash
Common Stock
Contribution Revenue
Cost of Goods Sold
Depreciation Expense
Direct Labor
Discount on Notes Payable
Equipment
Factory Overhead
Gain on Disposal of Buildings
Gain on Disposal of Equipment
Gain on Disposal of Machinery
Gain on Disposal of Trucks
Insurance Expense
Interest Expense
Inventory
Land
Land Improvements
Loss on Disposal of Buildings
Loss on Disposal of Equipment
Loss on Disposal of Machinery
Loss on Disposal of Trucks
Machinery
Maintenance and Repairs Expense
Materials
No Entry
Notes Payable
Organization Expense
Paid-in Capital in Excess of Par - Common Stock
Prepaid Insurance
Retained Earnings
Salaries and Wages Expense
Sales Revenue
Trading Securities
Trucks

1. Truck #1 has a list price of $38,550 and is acquired for a cash payment of $35,723. 2. Truck #2 has a list price of $41,120 and is acquired for a down payment of $5,140 cash and a zero-interest-bearing note with a face amount of $35,980. The note is due April 1, 2018. Buffalo would normally have to pay interest at a rate of 9% for such a borrowing, and the dealership has an incremental borrowing rate of 8%. 3. Truck #3 has a list price of $41,120. It is acquired in exchange for a computer system that Buffalo carries in inventory. The computer system cost $30,840 and is normally sold by Buffalo for $39,064. Buffalo uses a perpetual inventory system. 4. Truck #4 has a list price of $35,980. It is acquired in exchange for 910 shares of common stock in Buffalo Corporation. The stock has a par value per share of $10 and a market price of $13 per share.

Explanation / Answer

No Account Titles and Explanation Debit Credit 1 Truck          35,723 Cash          35,723 2 Truck          37,849 Discount on note payable            3,271 Cash            5,140 Note payable          35,980 .90909 *35980+5140 3 Truck          39,064 Cost of goods sold          30,840 Inventory          30,840 Sales Revenue          39,064 4 Trucks 13*910          11,830 Common Stock 910*10            9,100 Paid-in Capital in Excess of Par-Common Stock            2,730

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