Master Equipment has a $17,400 liability to Arrow Paint Co. When Master Equipment makes a partial payment of $7,600 on this liability, which of following is true about the journal entry made by Master to record this transaction?

Question

Quizplus · Accepted Answer

When Master Equipment makes a partial payment of $7,600, the liability account (Accounts Payable) is reduced by the same amount. To record this transaction, Master Equipment must debit Accounts Payable account by $7,600. Therefore, the correct option is D. Option A is incorrect because it implies that the transaction involves payments made from the company's cash account. Option B is incorrect because it suggests that only a portion of the liability is reduced instead of the full payment. Option C is incorrect because it implies that the company is receiving cash instead of making a payment.

Master Equipment Has a $17,400 Liability to Arrow Paint Co