On January 25, 2014, Marry Hinton, who owns The Candy Company, about an auto for
ID: 2524403 • Letter: O
Question
On January 25, 2014, Marry Hinton, who owns The Candy Company, about an auto for business proposes. Total cost was $19,200 that she paid the down payment of $4600 with a personal check investment in the business and financed the balance when an interest-free note that was to be paid by the business.
Required:
a. Record the purchase transaction in the journal
b. Prepare the journal entry to record the payment of the $14,600 note on April 24, 2016
c. What GAAP assumption applies to this case?
Explanation / Answer
Transaction Accounts Title Dr Cr a Jan 25 2014 Equipment $19,200 Marry Hinto Capital $4,600 Notes payable $14,600 (being auto purchased for business) b Notes payable $14,600 Cash $14,600 (being notes payable for cash) c Economic Entity assumption. As the equipment purchased is for business hence it is identified with the candy company If any doubt please comment