Journal entry for capital asset purchase including trade in.
Jane Geddes Engineering Corporation purchased conveyor equipment with a list price of $10,000. Presented below are three independent cases related to the equipment.
(Round to nearest dollar.)
(a) Geddes paid cash for the equipment 8 days after the purchase. The vendor's credit terms are 2/10, n/30. Assume that equipment purchases are recorded gross.
(b) Geddes traded in equipment with a book value of $2,000 (initial cost $8,000), and paid $9,500 in cash one month after the purchase. The old equipment could have been sold for $400 at the date of trade. (The exchange has commercial substance.)
(c) Geddes gave the vendor a $10,800 zero-interest-bearing note for the equipment on the date of purchase. The note was due in one year and was paid on time. Assume that the effective interest rate in the market was 9%.
Instructions
Prepare the general journal entries required to record the acquisition and payment on each of the independent cases above. Round to the nearest dollar.