A business purchases equipment by paying cash of $8,000 and issuing a note payable of $12,000. Which of the following occurs?

Question

Quizplus · Accepted Answer

In accounting, when a business purchases equipment, the equipment account is debited for the total purchase amount ($20,000 in this case, combining cash and note payable). Cash is credited for the amount paid in cash ($8,000), and notes payable is credited for the amount of the note issued ($12,000). This reflects the increase in equipment (an asset), the decrease in cash (another asset), and the increase in notes payable (a liability).

A Business Purchases Equipment by Paying Cash of $8,000 and Issuing