A business purchases equipment costing $4,000.They pay $1,500 right away and charge the remaining amount.To record this transaction,the business would:
A) Debit Equipment $2,500;Credit Accounts Payable $2,500
B) Debit Equipment $1,500;Credit Cash $1,500
C) Debit Equipment $4,000;Credit Accounts Payable $4,000
D) Debit Equipment $4,000;Credit Cash $1,500 and Credit Accounts Payable $2,500

Question

Quizplus · Accepted Answer

The business purchased equipment costing $4,000 but paid only $1,500 right away. The remaining amount was charged, which means the business has a liability to pay that amount in the future. Therefore, the transaction needs to be recorded by debiting Equipment for the full amount of $4,000 and crediting Cash for the amount paid immediately ($1,500) and Accounts Payable for the amount charged ($2,500). This makes choice D the best answer.

A Business Purchases Equipment Costing $4,000