Question - Described below are certain transactions of Lamar Company for 2018:
1. On May 10, the company purchased goods from Fox Company for $78,600, terms 2/10, n/30. Purchases and accounts payable are recorded at net amounts. The invoice was paid on May 18.
2. On June 1, the company purchased equipment for $87,600 from Rao Company, paying $27,600 in cash and giving a one-year, 9% note for the balance.
3. On September 30, the company discounted at 10% its $220,000, one-year zero-interest-bearing note at Virginia State Bank.
(a) Prepare the journal entries necessary to record the transactions above using appropriate dates.
(b) Prepare the adjusting entries necessary at December 31, 2018 in order to properly report interest expense related to the above transactions. Assume straight-line amortization of discounts.
(c) Indicate the manner in which the above transactions should be reflected in the Current Liabilities section of Lamar Company's December 31, 2018 balance sheet.