Question

The journal entry to record the purchase of equipment for a $140 cash down payment and a balance of $480 due in 30 days would include Multiple Choice debit to Equipment for $620 and a credit to Cash for $620. a debit to Equipment for $140 and a credit to Cash for $140. a debit to Equipment for $620, a credit to Cash for $140, and a credit to Accounts Payable for $480. a debit to Equipment for $140 and a credit to Accounts Payable for $480.

Answer 1

Option C. A debit to Equipment for $620, a credit to Cash for $140, and a credit to Accounts Payable for $480.

Step-by-step explanation:

The reason is that the equipment has been acquired by the business which is worth $620 and this means that the equipment which is asset in nature must be increased by it fair value which is $620. The purchase of equipment requires the payment of $140 at the spot which means that the cash asset will be reduced by $140 and the remainder $480 will be paid in future which means that the current liabilities will be increased by $480.

Increase in Equipment (fixed asset) is debited by $620.

Decrease in Cash (asset) is credited with $140.

Increase in current liability is always credited and in this case must be credited with $480.

Journal entry in nutshell is as under:

Dr Equipment $620

Cr Cash Account $140

Cr Accounts Payables $480