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.
What will be an ideal response?
1. Maturity date: September 17 (12 days in July, 31 days in August, 17 days in September)
| ? | 6/18 | Merchandise Inventory | 25,000 | ? |
| ? | ? | Accounts Payable | ? | 25,000 |
| ? | ? | ? | ? | ? |
| ? | 7/19 | Accounts Payable | 25,000 | ? |
| ? | ? | Notes Payable | ? | 12,000 |
| ? | ? | Cash | ? | 13,000 |
| ? | ? | ? | ? | ? |
| ? | 9/17 | Notes Payable | 12,000 | ? |
| ? | ? | Interest Expense (12,000 * .04 * 60/360) | 80 | ? |
| ? | ? | Cash | ? | 12,080 |
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