A firm purchased equipment for $12,000 on credit and issued a 120-day note bearing interest at 9 percent a year as evidence of the debt.To record this transaction,the accountant would debit
A) Equipment for $12,000 and credit Accounts Payable for $12,000.
B) Equipment for $12,000 and credit Notes Payable for $12,000.
C) Equipment for $12,360,credit Interest Expense for $360,and credit Notes Payable for $12,000.
D) Equipment for $12,000,debit Interest Expense for $360,and credit Notes Payable for $12,360.

Question

Quizplus · Accepted Answer

The purchase of equipment on credit is recorded by debiting Equipment for the cost of $12,000 and crediting Notes Payable for the same amount, as evidenced by the 120-day note. The interest expense is not incurred until the note is due and paid off, so it is not recorded at this time.

A Firm Purchased Equipment for $12,000 on Credit and Issued