Question

On July 1, Gilbert County bought computer equipment for use in the administrative offices of the County. The equipment has an estimated useful life of three years and salvage of $10,000. Gilbert County has a 6/30 fiscal year-end. Assuming that the County maintains its books and records in a manner that facilitates the preparation of fund financial statements, the $85,000 cost of this equipment would require which of the following entries? a. Debit Expenditures $85,000; Credit Cash $85,000. b. Debit Equipment $85,000; Credit Cash $85,000. c. Debit Expenses $85,000; Credit Cash $85,000. d. No entry in the City’s governmental funds

Answer 1

b. Debit Equipment $85,000; Credit Cash $85,000.

Step-by-step explanation:

Provided information,

Financial year will end on 30 June each year.

The computer equipment is purchased on 1 July

Cost of equipment = $85,000

Note: At the time of purchase as the equipment is long term, it will be accounted as fixed asset and is a capital expenditure, not a revenue expense to be charged in books of account.

Therefore, entry for recording the purchase of computer equipment shall be:

Equipment A/c Dr. $85,000

To Cash A/c $85,000

(Recording purchase of equipment in exchange of cash)