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:

Domestic Price

The price of goods or services within a particular country, influenced by domestic supply and demand, taxation, and other economic factors.

Exports

Products or services that are manufactured in one nation and purchased by consumers in a different country.

Imports

Items or services that come from foreign countries for the purpose of being sold domestically.

Import-Licensing Requirement

Regulations requiring a company or individual to obtain permission, often through a specific license, before importing goods into a country, used by governments to control the volume and types of goods entering the market.