Question

The following are selected 2020 transactions of Teal Corporation. Sept. Purchased Inventory from Encino Company on account for $40,200, Teal records purchases gross and uses a 1 periodic inventory system. Oct. Issued a $40,200, 12-month, 8% note to Encino in payment of account. Borrowed $40,200 from the Shore Bank by signing a 12-month, zero-interest-bearing $44,240 note. Your answer is partially correct. Prepare journal entries for the selected transactions above. (If no entry is required, select "No Entry" for the account titles and enter 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.) Date Account Titles and Explanation Debit Credit September 1 Inventory 40200 Accounts Payable

Answer 1

Answer to Part 1.

The correct journal entry for September 1 would be:

Date	Account Title and Explanation	Debit	Credit
Sept 1	Purchases	40,200
	Accounts Payable		40,200

Answer to Part 3.

The net liability to be reported on the December 31 balance sheet is:.

(1) The interest bearing note:

Net Liability to be reported = Notes Payable + Interest Payable

Net Liability to be reported = $40,200 + $804 = $41,004

(2) The zero interest bearing note:

Discount amortized = $1,010

Unanimous Discount = $4,040 - $1,010 = $3,030

Net Liability to be reported = $44,20 - $3,030

Net Liability to be reported = $41,210