Question

Coronado Engineering Corporation purchased conveyor equipment with a list price of $10,900. Presented below are three independent cases related to the equipment.

Prepare the general journal entries required to record the acquisition and payment in each of the independent cases above.

(a)

 

Coronado paid cash for the equipment 8 days after the purchase. The vendor’s credit terms are 2/10, n/30. Assume that equipment purchases are initially recorded gross.

(b)

 

Coronado traded in equipment with a book value of $2,200 (initial cost $7,300), and paid $8,700 in cash one month after the purchase. The old equipment could have been sold for $400 at the date of trade. (The exchange has commercial substance.)

(c)

 

Coronado gave the vendor a $11,500 zero-interest-bearing note for the equipment on the date of purchase. The note was due in one year and was paid on time. Assume that the effective-interest rate in the market was 9%.