Described below are certain transactions of Edwardson Corporation. The company u
ID: 2491025 • Letter: D
Question
Described below are certain transactions of Edwardson Corporation. The company uses the periodic inventory system.
1. On February 2, the corporation purchased goods from Martin Company for $78,700 subject to cash discount terms of 3/10, n/30. Purchases and accounts payable are recorded by the corporation at net amounts after cash discounts. The invoice was paid on February 26.
2. On April 1, the corporation bought a truck for $81,000 from General Motors Company, paying $4,000 in cash and signing a one-year, 10% note for the balance of the purchase price.
3. On May 1, the corporation borrowed $126,000 from Chicago National Bank by signing a $135,720 zero-interest-bearing note due one year from May 1.
4. On August 1, the board of directors declared a $319,000 cash dividend that was payable on September 10 to stockholders of record on August 31. Collapse question part (a)
Date Account Titles and Explanation Debit Credit February 2 February 26 April 1 May 1 August 1 September 10Explanation / Answer
Debit Purchases 76339 78,700*97% Credit Accounts payable 76339 (The net method assumes the discount is realized and records the lowest amount payable) Debit Accounts Payable 76339 Debit Purchase discount lost 2361 Credit Cash 78700 Debit Fixed Assets 81000 Credit Cash 4000 Credit Notes Payable 77000 Adjusting entry for interest Debit Interest Expenses 5775 77,000*10%*9/12 Credit Interest Payable 5775 Debit Cash 126000 Debit Discount on notes payable 9720 Credit Notes Payable 135720 Adjusting entry for interest Debit Interest Expenses 6480 6,480*8/12 Credit Interest Payable 6480 Debit retained earnings 319000 Credit Dividend Payable 319000 Debit Cash 319000 Credit Dividend Payable 319000