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Homework answers / question archive / Serene Company purchases fountains for its inventory from Kirkland Inc

Serene Company purchases fountains for its inventory from Kirkland Inc

Accounting

Serene Company purchases fountains for its inventory from Kirkland Inc. The following transactions take place during the current year. A. On July 3, the company purchases thirty fountains for $3113 per fountain, on credit. Terms of the purchase are 2/10, n/30, invoice dated July 3. B. On August 3, Serene does not pay the amount due and renegotiates with Kirkland. Kirkland agrees to convert the debt owed into a short-term note, with an 8% annual interest rate, payable in two months from August 3. C. On October 3, Serene Company pays its account in full. Record the journal entries to cognize the initial purchase, the conversion, and the payment.

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Date

Particular

Debit ($)

Credit

July 3

Inventory   a/c    Dr

     To Kirkland a/c

( to record purchase of inventory on credit , 3113×30)

$93,390

$93,390

Aug 3

Kirkland Inc a/c   Dr

      To Notes Payable a/c

(to convert the debt into 8% ,2months note payable )

$93,390

$93,390

Oct 3

Interest expenses a/c    Dr

Notes payable       a/c Dr

            To cash a/c

(Payment in full to settle note payable )

$1245.2

$93390

$94635.2

Interest Expenses

93,390 × 8% ×2/12   = 1245.2

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