The purchase of land for a combination of cash and a 15-year note would require which of the following entries?
A)Dr.Land, Dr.Cash, Cr.Long-term note payable
B)Dr.Land, Cr.Cash, Cr.Long-term note payable
C)Dr.Cash, Cr.Long-term note payable, Cr.Land
D)Dr.Land, Dr.Long-term note payable, Cr.Cash

Question

Quizplus · Accepted Answer

When land is purchased for a combination of cash and a 15-year note, it means that a part of the payment is made in cash, and the rest is agreed to be paid over a period of 15 years. Therefore, we need to debit the Land account for the full amount and credit Cash for the amount paid in cash at the time of purchase. We also need to credit a Long-term note payable account for the amount of the note that will be paid over 15 years. Hence, the correct entry would be to debit Land and Long-term note payable and credit Cash. Option B is the correct entry as it depicts Dr.Land, Cr.Cash and Cr.Long-term note payable.

The Purchase of Land for a Combination of Cash and a 15-Year