Company B purchased a large machine at a cash equivalent cost of $25,000 on January 1, 2001. On that date the company paid $10,000 cash and gave a one-year, 10 percent interest-bearing note payable for the remaining $15,000. Therefore, the company should debit the machinery account for $25,000.

Question

Quizplus · Accepted Answer

The cost of the machinery is $25,000, regardless of the payment method. Therefore, the machinery account should be debited for the full amount.

Company B Purchased a Large Machine at a Cash Equivalent