Zagat Inc. enters into an agreement on March 1, 2014, to sell Werner Metal Company aluminum ingots in 2 months. As part of the agreement, Zagat also agrees to repurchase the ingots in 60 days at the original sales price of $200,000 plus 2%. (Because Zagat has an unconditional obligation to repurchase the ingots at an amount greater than the original sales price, the transaction is treated as a financing.)
Instructions
(a) Prepare the journal entry necessary on March 1, 2014.
(b) Prepare the journal entry for the repurchase of the ingots on May 1, 2014?