Accounts and Notes Payable

question 71

Essay

Accounts and Notes Payable
Below are selected transactions of Blackbird Ltd. for 2020, which uses a perpetual inventory system:
1. On May 10, the company purchased goods from Jay Corp. for $ 60,000, terms 2/10, n/30. The invoice was paid on May 18.
2. On June 1, the company purchased equipment for $ 180,000 from Seagull Ltd., paying $ 60,000 in cash and giving a one-year, 8% note for the balance.
3. On September 30, the company borrowed $ 162,000 from the Second National Bank by signing a one year, zero-interest-bearing note for $ 178,200. The discount rate was 10%.
Instructions
a) Prepare the journal entries necessary to record these transactions using appropriate dates.
b) Prepare the adjusting entries necessary at December 31, 2020 in order to properly report interest expense related to the above transactions.
c) Indicate the manner in which the above transactions should be reflected in the Current Liabilities section of Blackbird's December 31, 2020 statement of financial position.

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Definitions:

Relevant

Pertaining to information or factors that are applicable and significant to a specific decision or situation.

Alternatives

Different options or strategies considered in decision-making processes or problem-solving situations.

Sunk Costs

Costs that have already been incurred and cannot be recovered, and therefore should not factor into future decisions.

Decision Making

Selecting a course of action from competing alternatives.