Question

Multiple Choice Question 181 Equipment costing $21600 is purchased by paying $5400 cash and signing a note payable for the remainder. The Journal entry should include a debit to Cash credit to Equipment. credit to Notes Payable. credit to Notes Receivable. Click if you would like to Show Work for this question: Open Show Work

Answer 1

Journal Entry to Record the Purchase of Equipment

Equipment A/C...Dr 21,600

To Cash A/C. 5,400

To Notes Payables A/C. 16,200

Notes Payables = 21,600 - 5,400 = $ 16,200

As the Equipment is an asset Account and Assets Increase with the debit balance the Equipment Account will be debited as the purchase will increase the balance of Equipment.

$ 5,400 is paid with so Cash will decreased by 5400 and for the decrease credit to cash is to be made as the assets decrease with the credit balance.

For the balance of $ 16,200 Notes is signed which is a liability for the company's which the company has to pay in future course of time and the balance of liability increases with a credit balance so the Notes Payables will be credited

On the basis of all our discussion above we can draw a conclusion that out of the various options available as answers Option C Credit to Notes Payables is the correct answer to the question.

Option C is the Correct Answer.