Question

Your firm purchases a bookcase and you are given the following data: Cost $700 Sales tax 35 Freight (paid by purchaser) 40 To record the purchase, you:

Answer 1

Asset:

Dr. Asset 775

Cr. Account Payable/Cash 775

Expense:

Dr. Expense 735

Dr. Carr. In 40

Cr Account Payable/Cash 775

Step-by-step explanation:

If the purchase is to be capitalized, debit the asset account with $775, credit the cash/account payable with $775.

If the purchase is to be immediately expensed, debit the expense account with $735, carriage with $40 and credit the cash/accounts payable with $775.