Question

A business purchases equipment by paying $7,448 in cash and issuing a note payable of $13,383.

Which of the following​ occurs?

A. Cash is credited for $7,448​, Equipment is credited for $20,831​, and Notes Payable is debited for $13,383.
B. Cash is debited for $7,448​, Equipment is debited for $13,383​ and Notes Payable is credited for $20,831.
C. Cash is debited for $7,448​, Equipment is credited for $13,383​, and Notes Payable is debited for $5,935.
D. Cash is credited for $7,448​, Equipment is debited for $20,831​, and Notes Payable is credited for $13,383

Answer 1

When a business buys equipment with both cash and a note payable, the cash is credited, equipment is debited for the total cost, and notes payable is credited for the amount of the note.

Step-by-step explanation:

Correct journal entries are essential for portraying the accurate financial position of a business. In the scenario where a business purchases equipment by paying $7,448 in cash and issuing a note payable of $13,383, the appropriate journal entries would be to credit the cash account for $7,448, to debit the equipment account for a total of $20,831 (the sum of the cash paid and the note payable), and to credit the notes payable account for $13,383. This acknowledges the outflow of cash, the acquisition of equipment as an asset, and the creation of a liability in the form of the note payable.