Journalize the following entries on the books of Winston Co. for August 1, September 1, and November 30. (Assume a 360-day year is used for interest calculations.) Aug. 1 Winston Co. purchased merchandise for $75,000 on account from Bagley Co., terms n/30.
Sept. 1 Winston Co. issued a 90-day, 6% note for $75,000 on account.
Nov. 30 Winston Co. paid the amount due.

PLease see explanation for answers

Explanation:

Journal to record Purchase of  Inventory  

DateAccount Title                            Debit  Credit

Aug.1Merchandise Inventory              $75,000  

                    Bagley Co.                                  $75,000

To record  Issue of Note  

Sep 1Bagley Co.                  $75,000  

6% Note Payable                                              $75,000

To Record Payment of Note at due date

Nov 306% Note Payable                 $75,000  

            Interest Expenses                $1,125  

                     Cash                                                   $76,125

Calculation

Interest expense = Principal x rate x Time

= $75,000 x 60  x 90/360

=$1,125  

When doing time trend analysis for financial ratios we can know how a company's ratio's have changed over time or if they have remained the same, so for example if a company's current ratio was less than 1 a year ago and is 3 now it means that the company was not very liquid a year ago but since then has made changes because of which it is liquid now, so we can see how a company has performed over a certain period of time.

On the other hand peer group analysis tells us how a company is performing compared to other companies in the same industry. For example if our cement company has a profit margin of 7% but the industry average is 15% we know that our company is doing something wrong  or different as compared to the industry and we can look into it.

Explanation: