The correct entry to record the purchase of a motor vehicle for $25 000 cash, plus 10% GST is which of the following?

Question

Quizplus · Accepted Answer

The purchase of a motor vehicle for $25,000 plus 10% GST would result in a total cost of $27,500 ($25,000 + $2,500 GST). Therefore, option B is correct as it correctly debits the motor vehicles account for the cost of the vehicle ($25,000) and also debits the GST outlays account for the amount of GST paid ($2,500), with a credit to the bank account for the total cost of the vehicle and the GST ($27,500). Option A is incorrect as it only debits the motor vehicles account for the cost of the vehicle and credits the bank account for the total cost, without accounting for the GST paid. Option C is also incorrect as it debits the bank account for more than the total cost of the vehicle and credits the GST collected account, which is not applicable in this scenario. Option D is incorrect as it debits the motor vehicles account for less than the cost of the vehicle and credits the bank account for less than the total cost of the vehicle and the GST paid.

The Correct Entry to Record the Purchase of a Motor