Sparks Company Entered into the Following Transactions Involving Short-Term Notes

question 116

Essay

Sparks Company entered into the following transactions involving short-term notes payable. On June 18, Sparks purchased $25,000 merchandise from EquipCo., terms 2/10, n/30. Sparks uses the perpetual inventory system. On July 19, Sparks replaced the June 18 account payable with a
60-day, $12,000 note bearing 4% annual interest in addition to paying $13,000 in cash. Sparks paid the amount due on the note at maturity.
1. Determine the maturity date for the note.
2. Prepare journal entries for all the preceding transactions and events.

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Definitions:

FOB Shipping Point

This term indicates that the buyer is responsible for the goods and their shipping costs as soon as the goods leave the seller's premises.

Net Income

The total earnings of a company after all expenses and taxes have been subtracted from total revenue.

Ending Inventory

The closing stock value, determined at the end of a financial period, is the sum of the initial inventory and acquisitions, less the cost of goods sold.

Internal Control

Systems and processes designed by a company to ensure integrity and accuracy of financial and accounting information, promote accountability, and prevent fraud.