The Gulp convenience store chain buys new soda machines for $450,000 and pays $50,000 for installation.One-half of the total cost is paid in cash; the other half is financed.How should the company record this transaction?
A)Debit cash for $250,000,debit notes payable for $250,000,and credit equipment for $500,000.
B)Debit equipment for $500,000,credit cash for $250,000,and credit notes payable for $250,000.
C)Debit cash for $250,000,debit notes payable for $250,000 credit equipment for $450,000,and credit expenses for $50,000.
D)Debit equipment for $450,000,debit expenses for $50,000,credit cash for $250,000,and credit notes payable for $250,000.

Question

Quizplus · Accepted Answer

Equipment is debited for the total cost of the asset ($450,000 + $50,000 = $500,000),Cash is credited for one-half of the total cost ($500,000/2 = $250,000),and Notes Payable is credited of the other half of the total cost.

The Gulp Convenience Store Chain Buys New Soda Machines for $450,000