Bramble Corporation builds in-home theater systems. Bramble’s business is growin
ID: 2525711 • Letter: B
Question
Bramble Corporation builds in-home theater systems. Bramble’s business is growing quickly. Therefore, the CEO, Paul Bramble, decides to purchase three new trucks on September 20, 2017. The terms of acquisition for each truck are described below.
1. The first truck’s list price is $26,040. Bramble exchanges home theater equipment from its inventory for the truck. The home theater equipment cost Molitor $16,120. Bramble normally sells the equipment for $24,490. Bramble uses a perpetual inventory system.
2. The second truck has a list price of $27,280. Bramble makes a down payment of $6,200 cash on this truck and signs a zero-interest-bearing note with a face amount of $21,080. Payment of the note is due September 20, 2018. Bramble would normally have to pay interest at a rate of 8% for such a borrowing.
3. The list price of the third truck is $23,808. This truck is acquired in exchange for 1,488 shares of common stock in Bramble Corporation. The stock has a par value per share of $10 and a market price of $15 per share.
Prepare the appropriate journal entries for the above transactions for Bramble Corporation
Explanation / Answer
2. 2017
Sep 20 Truck A/c Dr $ 27280
To Cash A/c $ 6200
To Note Payable $ 21080
2018
SeP 20 Notes payable A/c Dr $ 21080
Interest A/c Dr $ 1686 ( 8% of 21080)
To Cash A/c 22766
3)
Truck A/c Dr $ 22320
To Common stck $ 14880
To Premium on issue of common stock $ 7440
( Truck list price = 23808 but against this issue common stock of value 1488*15 = 22320
Balance discount 1488)
1) Truck A/c Dr $ 16120
To COGS $ 16120
COGS A/c Dr $ 16120
To Inventory $ 16120