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29 June, 15:06

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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  1. 29 June, 15:52
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    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.
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