Journal entries of accounts and notes payable

Reference no: EM1357239

Described below are certain transactions of Jackson Company for 2007:

a. On May 10, the company purchased goods from Hickory Company for $55,000, terms 2/10, n/30. Purchases and accounts payable are recorded at gross amounts. The invoice was paid on May 18. Jackson uses the periodic method for inventory purchases.

b. On June 1, the company purchased equipment for $60,000 from North Land Company, paying $20,000 in cash and giving a one-year, 8% note for the balance.

c. On September 30, the company discounted at 10% its $150,000, one year zero-interest bearing note at Gary National Bank.

1. Prepare the journal entries necessary to record the transactions above using the appropriate dates.

2. Prepare the adjusting entries necessary at Dec. 31, 2007 in order to properly report interest expense related to the above transactions. Assume straight-line amortization of discounts.

Reference no: EM1357239

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