Question

The purchase of office equipment at a cost of $7,600 with an immediate payment of $4,200 and agreement to pay the balance within 60 days is recorded by the purchaser with:_____.

A. A debit of $7,600 to Office Equipment, a credit of $4,200 to Cash, and a credit of $3,400 to Accounts Payable.
B. A debit of $7,600 to Office Equipment, a debit of $4,200 to Accounts Receivable, and a credit of $3,400 to Accounts Payable.
C. A debit of $3,400 to Accounts Receivable, a debit of $4,200 to Cash, and a credit of $7,600 to Office Equipment.
D. A debit of $7,600 to Office Equipment, a credit of $4,200 to Cash, and a credit of $3,400 to Accounts Receivable.

Answer 1

For recording the office equipment purchase, the correct journal entry is a debit to Office Equipment for the cost and credits to Cash and Accounts Payable for the payment made and balance due. When the Fed buys bonds from Acme Bank, the bank's reserves increase while bonds decrease, and potential new loans could arise. Lastly, to determine a bank's net worth, subtract total liabilities from total assets in a T-account balance sheet.

Step-by-step explanation:

The correct answer to the student's query on recording the purchase of office equipment is A. A debit of $7,600 to Office Equipment, a credit of $4,200 to Cash, and a credit of $3,400 to Accounts Payable. When recording this transaction, the total cost of the equipment is debited to the Office Equipment account, because this represents an asset being added to the company. The cash payment is credited to the Cash account, which shows a decrease in the company's cash balance. The remaining unpaid balance is credited to Accounts Payable, indicating that the company now has a liability that it must pay off within 60 days.

• As for the scenarios regarding the Acme Bank balance sheet and Federal Reserve's open market operations, let's address the first provided scenario:

• Reserves increase by $10 million as the Fed credits Acme Bank's reserve account for the purchased bonds.Bonds decrease by $10 million as the bonds are sold to the Fed.

• The **new loans** reflect the use of new reserves created from the sale to the Fed. Assuming a 10% reserve requirement, Acme can extend up to $100 million in new loans. However, the figures in the problem query might be off, and we should use the actual figures presented in the initial balance sheet.

In the case of the T-account problem for setting up a balance sheet and calculating net worth:

1. Sum total assets: reserves ($50) + government bonds ($70) + loans ($500) = $620 in assets.
2. Sum total liabilities: deposits of $400.
3. Calculate net worth: assets ($620) - liabilities ($400) = $220 in equity.

Answer 2

A. A debit of $7,600 to Office Equipment, a credit of $4,200 to Cash, and a credit of $3,400 to Accounts Payable.

Step-by-step explanation:

Recognize the Asset - Office Equipment and Accounts Payable Accounts as these are increasing. De-recognize the Cash Account as this account is decreasing.