On January 25, 2014, Marry Hinton, who owns The Candy Company, about an auto for

Question

On January 25, 2014, Marry Hinton, who owns The Candy Company, about an auto for business proposes. Total cost was $19,200 that she paid the down payment of $4600 with a personal check investment in the business and financed the balance when an interest-free note that was to be paid by the business.

Required:

a.   Record the purchase transaction in the journal

b.   Prepare the journal entry to record the payment of the $14,600 note on April 24, 2016

c.   What GAAP assumption applies to this case?

Explanation / Answer

Transaction Accounts Title Dr Cr a Jan 25 2014 Equipment $19,200 Marry Hinto Capital $4,600 Notes payable $14,600 (being auto purchased for business) b Notes payable $14,600 Cash $14,600 (being notes payable for cash) c Economic Entity assumption. As the equipment purchased is for business hence it is identified with the candy company If any doubt please comment

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