Reference no: EM13152822
Described below are certain transactions of Carson Company for 2007:
1. On May 10, the company purchased goods from Jay Company for $50,000, 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 $60,000 from Nolan Company, paying $20,000 in cash and giving a one-year, 9% note for the balance.
3. On September 30, the company discounted at 10% its $120,000, one-year zero-interest-bearing note at First State Bank.
Instructions
(a) Prepare the journal entries necessary to record the transactions above using appropriate dates.
(b) Prepare the adjusting entries necessary at December 31, 2007 in order to properly report interest expense related to the above transactions. Assume straight-line amortization of discounts.
(c) Indicate the manner in which the above transactions should be reflected in the Current Liabilities section of Carson Company's December 31, 2007 balance sheet.
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