Question

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QUESTION:

The property, plant and equipment account normally maintains a credit balance.

o True

o False

1. Use the template below to indicate how the following transactions affect the accrual basis accounting equation: a. Kissimmee, Inc. (a retail store) begins business on January 1, 2015 with a $100,000 cash contribution from the owners. b. On January 1, 2015, Kissimmee hires live employees to manage and operate the business. c. On January 1, 2015, Kissimmee prepays the monthly rent of $500 cash. d. On January 27, 2015, Kissimmee issues a 129 note payable to purchase warehouse equipment for $10,000. e. On January 10, 2015, Kissimmee purchases goods from a wholesaler for $2,500 cash, and sells the goods on the same day to a customer for S4,500 cash. f. On January 15, 2015, Kissimmee pays wages due employees in the amount of $750 cash. g. On January 20, 2015, Kissimmee pays various utility expenses in the amount of $400 cash. h. On January 25, 2015. Kissimmee purchases goods on credit from a wholesaler in the amount of $1,000. 1. On January 26, 2015, Kissimmee settles $400 of accounts payable with cash payments. j. On January 27, 2015, Kissimmee sells goods to a customer, which cost $900. for $2.000 cash. k. On January 28, 2015, Kissimmee prepays the February rent of $500 cash. 1. On Jamary 29, 2015, Kissimmee makes a credit sale of goods to a customer, which cost $700, for $200. m. On Jamiary 30, 2015, Kissimmee purchases machinery with $5,000 cash. n. On January 30, 2015. Kissimmee settles the Note Payable with interest for $10,100. 0. On January 31, 2015, Kissimmee collects $200 from previous credil sales. p. On January 31, 2015, Kissimmee makes cash payments for salaries and wages for $1,500. Transaction reference Assets Accounts Receivable Inventory Prepaid Rent Liabilitics Accounts Notes Payable Payable Shareholders' Equity Contributed Capital Revenue (+) Expenses (-) $100,000 PP&E Cash $100,000 2 b $(500) $500 $10.000 S10,000 d d e(1) e(2) f $4,500 $4,500 $2.500) $(750) $(400) $2.500 S750 S400 $1,000 $1,000 h 1 1/1) 1(2) ($400) $2,000 (S400) $2,000 ($900) $900 (S500) $500 1 $200 ($100) $200 $100 131 $5,000 72 ($70,000) ($5,000) ($70.100) $200 ($1.500) O ($200) P $1.500 Totals $85,050 $0 SO $7,000 $75.000 $600 SO $100,000 S6,700 $6,250

Answer 1

False, Property plant and Equipment does not normally maintain a credit balance

Thumb rule - All Assets maintain a debit balance

Property, Plant and Equipments are the Fixed assets that an entity purchase to use in the course of business (example - manufacturing plant is used for production, office equipments used for administrative works,etc)

When a Property, Plant and Equipment is purchased by a business, the Property, Plant and Equipment account is debited and either Cash or the Accounts payable account would be credited in the Journal

The value of Property, Plant and Equipment in the balance sheet reduces over time due to provision of depreciation year on year, but the same cannot fall below 'zero'.Hence the Property,Plant and Equipment would normally maintain a debit balance (Property,Plant and Equipment can either have a 'Debit' balance or a 'zero' balance only)

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