Bostel wanted to expand the size of its warehouse in order to generate more profits. The company decided to purchase the building adjacent to its existing warehouse. The company pays for the building by borrowing from the bank. The purchase would be recorded as:

Question

Quizplus · Accepted Answer

The purchase of the building should be recorded by debiting the Buildings account and crediting the Notes Payable account, as the company is purchasing the building by borrowing funds from the bank, which creates a liability in the form of Notes Payable. There is no cash involved in this transaction, so option A and B are incorrect. Option D is also incorrect, as it suggests recording the purchase of the building with both cash and buildings, which does not make sense as the company is borrowing funds to purchase the building.

Bostel Wanted to Expand the Size of Its Warehouse in Order