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

Question

Quizplus · Accepted Answer

When a business purchases equipment, it needs to record the transaction in its books of accounts. In this case, the business paid $8,000 in cash and issued a note payable of $12,000, which means it acquired the equipment for $20,000.

To record this transaction, the business will make the following entries:
- Cash is credited (decreased) for $8,000. 
- Equipment is debited (increased) for $20,000. 
- Notes Payable is credited (increased) for $12,000.

Therefore, option B is the correct choice, as it reflects these entries correctly.

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