The following are selected 2020 transactions of Astin Corporation. Sept. 1 Purchased inventory from Encino Company on account for $50,000. Astin records purchases gross and uses a periodic inventory system. Oct. 1 Issued a $50,000, 12-month, 8% note to Encino in payment of account. Oct. 1 Borrowed $50,000 from the Shore Bank by signing a 12-month, zero-interest-bearing $54,000 note. Part 1 Prepare journal entries for the selected transactions above. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record entries in the order displayed in the problem statement.)

Question

Reynaldo Zamora

Business

6 July, 10:06

The following are selected 2020 transactions of Astin Corporation. Sept. 1 Purchased inventory from Encino Company on account for $50,000. Astin records purchases gross and uses a periodic inventory system. Oct. 1 Issued a $50,000, 12-month, 8% note to Encino in payment of account. Oct. 1 Borrowed $50,000 from the Shore Bank by signing a 12-month, zero-interest-bearing $54,000 note. Part 1 Prepare journal entries for the selected transactions above. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record entries in the order displayed in the problem statement.)

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Tony Guzman · Answer 1

inventory 50,000 debit

accounts payable 50,000 credit

--to record purchase of goods--

accounts payable 50,000 debit

notes payables 50,000 credit

--to record teh issued promissory note to setle the account--

cash 50,000 debit

discount on note payable 4,000 debit

notes payable 54,000 credit

--to record the discounted note--

Explanation:

a) we record the purchase as always.

b) we are trading a liability for another. We do not receive for the note.

c) we discount on the note and we are goind to declare the interest expense at maturity or year-end against this discount.