Your company purchases equipment for $2 million paying $300,000 in cash and issuing $1.7 million in promissory notes.When the journal entry is posted to the related accounts:

Question

Quizplus · Accepted Answer

The purchase of equipment for $2 million is a transaction with both asset and liability components. The $2 million will be debited (increase) to the asset accounts, and since $300,000 was paid in cash, it will be debited (increase) to the cash account. The remaining $1.7 million will be credited (increase) to the promissory note liability accounts. Therefore, answer choice C is correct as it reflects these journal entries.

Your Company Purchases Equipment for $2 Million Paying $300,000 in Cash