Question

A company purchased $20,100 of supplies on credit. The journal entry to record this transaction consists of a:

a) Debit Accounts Payable for $20,00, credit Supplies for $20,100.
b) Debit Supplies for $20,500; credit Prepaid Expense for $20,100
c) Debit Supplies for $20,100; cred Cash for $20,100
d) Debit Supplies for $20,100; credit Accounts Payable for $20,100.
e) Debit Cash for $20,500, credit 5 upplies for $20,100.

Answer 1

The correct journal entry is a debit to Supplies for $20,100 and a credit to Accounts Payable for $20,100, reflecting an increase in assets and liabilities respectively.

Step-by-step explanation:

The correct journal entry for a company that purchased $20,100 of supplies on credit should reflect an increase in assets (supplies) and an increase in liabilities (accounts payable). The correct entry is therefore:

• Debit Supplies for $20,100
• Credit Accounts Payable for $20,100

This accounting entry shows that the company received supplies and owes money in the future for these supplies. So, the answer is (d) Debit Supplies for $20,100; credit Accounts Payable for $20,100.