C. Palmer opens a new computer sales and repair business. His assets are: Premises $700 000, Equipment $100 000, Inventory $150 000, and Cash $30 000. His liabilities are: Payables - M Rice $25 000. The journal entry to record the opening would include:
A)a credit to Capital for $955 000.
B)a debit to Capital for $955 000.
C)a credit to Capital for $1 050 000.
D)a debit to Capital for $1 050 000.

Question

Quizplus · Accepted Answer

The capital is calculated as total assets minus total liabilities. Total assets are $980,000 ($700,000 + $100,000 + $150,000 + $30,000) and liabilities are $25,000. Therefore, capital is $955,000 ($980,000 - $25,000), which is credited.

C Palmer Opens a New Computer Sales and Repair Business