Answer:
A. Debit Cash with $200,000, and Credit Liability to Werner Metal Company with $200,000
.
B. Debit interest expense and Liability to Werner Metal Company with $4,000 and $200,000 respectively, Credit cash with $204,000.
Explanation:
A) Prepare the journall entry necessary on March 1, 2014.
Details Dr ($) Cr ($)
Cash 200,000
Liability to Werner Metal Company 200,000
<em>Being cash received from the agreement to sell aluminum ingots in 2 months.</em>
B) Prepare the journal entry for the repurchase of the ingots on May 1, 2014.
Details Dr ($) Cr ($)
Interest expense ($200,000 × 2%) 4,000
Liability to Werner Metal Company 200,000
Cash 204,000
<em>Being settlement of liability with interest for the repurchase of the ingots.</em>
