Ramsey Company issues an $800,000, 45-day note to Buckner Company for merchandis

Question

Ramsey Company issues an $800,000, 45-day note to Buckner Company for merchandise inventory. Buckner discounts the note at 7%. Required: A. Journalize Ramsey’s entries to record (refer to the company’s Chart of Accounts for exact wording of account titles): 1. the issuance of the note on January 1. 2. the payment of the note at maturity. Assume a 360-day year. B. Journalize Buckner’s entries to record (refer to the company’s Chart of Accounts for exact wording of account titles): 1. the receipt of the note on January 1. 2. the receipt of the payment of the note at maturity. Assume a 360-day year. Be sure to enter the correct dates

Explanation / Answer

a) Date Account Titles and Explanations Debit Credit Ramsey Company Jan 1 Merchandise Inventory $793,000.00 Interest Expenses (800000 x 45/360 x 7%) $7,000.00                Notes Payable $800,000.00 Feb 14 Notes Payable $800,000.00                       Cash $800,000.00 b) Buckner’ Jan 1 Notes Receivables $800,000.00                Sales $793,000.00                Interest Revenue $7,000.00 Feb 14 Cash $800,000.00                Notes Receivables $800,000.00

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