Final answer:
The purchase of a new cash register for $1,200 results in the company's assets increasing by the value of the cash register and the cash account decreasing by the payment amount. This transaction mirrors the lending processes in banks like Singleton's loan to Hank's Auto Supply, affecting both assets and liabilities.
Step-by-step explanation:
When a company purchases a new cash register in exchange for a cash payment of $1,200, the accounting records will reflect this transaction. The purchase of the cash register represents an addition to the company's assets, specifically under property, plant, and equipment (PP&E). As a result of recording the purchase, the company's assets increase due to the addition of the cash register, and the cash account decreases by $1,200 since this amount was used to pay for the cash register.
To understand this concept better, let's consider another scenario for illustration. Assume Singleton Bank lends $9 million to Hank's Auto Supply. The bank will record this loan as an asset on its balance sheet, expecting to generate interest income. Conversely, Hank's Auto Supply would have a liability (the loan itself) and a corresponding increase in their bank account balance, following the deposit of the cashier's check from Singleton Bank. When the loan is deposited into Hank's account with First National, the deposits and reserves of First National increase by $9 million. However, First National is required to maintain 10% of that deposit as required reserves, but it can loan out the rest.
Overall, the entry to record the purchase of a cash register in exchange for a cash payment is a straightforward transaction affecting both asset accounts - cash and equipment.