Question 1 Described below are certain transactions of Lamar Company for 2018 1.
ID: 2537982 • Letter: Q
Question
Question 1 Described below are certain transactions of Lamar Company for 2018 1. On May 10, the company purchased goods from Fox Company for $77,800, terms 2/10, n/30. Purchases and accounts payable are recorded at net amounts. The invoice was paid on May 18 2. On June 1, the company purchased equipment for $87,600 from Rao company, paying $24,000 in cash and giving a one-year, 9% note for the balance. 3. On September 30, the company discounted at 10% its $180,000, one-year zero-interest-bearing note at Virginia State Bank.Explanation / Answer
Answer
1.
Date
Debit
Credit
10-May
Purchases (77,800 - 2%)
76,244
Accounts Payable (Fox Company)
76,244
(Being goods purchased on credit and recorded at net amount i.e. after discount)
18-May
Accounts Payable (Fox Company)
76,244
Cash
76,244
(Being amount paid to accounts payable)
1-Jun
Equipment
87,600
Cash
24,000
9% Notes payable
63,600
(Being equipment purchased and paid some cash and for remaining issued 9% note)
30-Sep
Bank
162,000
Discount on Note payable
18,000
10% Note Payable
180,000
(Being note discounted at 10% discount)
2.
Date
Debit
Credit
31-Dec
Interest(63,600 * 9% * 7/12 months)
3,339
Interest Payable
3,339
(Being interest due for 7 months i.e. From June to December)
31-Dec
Interest (18,000 * 3/12 months)
4,500
Discount on Note payable
4,500
(Being discount amortized for 3 months i.e. From October to December)
3.
Current Liabilities
Interest Payable
3,339
9% Notes Payable
63,600
10% Notes payable
180,000
Less: Discount(18,000 - 4500)
13,500
166,500
Total Current Liabilities
233,439
Date
Debit
Credit
10-May
Purchases (77,800 - 2%)
76,244
Accounts Payable (Fox Company)
76,244
(Being goods purchased on credit and recorded at net amount i.e. after discount)
18-May
Accounts Payable (Fox Company)
76,244
Cash
76,244
(Being amount paid to accounts payable)
1-Jun
Equipment
87,600
Cash
24,000
9% Notes payable
63,600
(Being equipment purchased and paid some cash and for remaining issued 9% note)
30-Sep
Bank
162,000
Discount on Note payable
18,000
10% Note Payable
180,000
(Being note discounted at 10% discount)
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