The Gulp convenience store chain buys new soda machines for $450,000 and pays $50,000 for installation. One-half of the total cost is paid in cash; the other half is financed. How should the company record this transaction?
A) Debit cash for $250,000, debit notes payable for $250,000, and credit equipment for $500,000.
B) Debit equipment for $500,000, credit cash for $250,000, and credit notes payable for $250,000.
C) Debit cash for $250,000, debit notes payable for $250,000 credit equipment for $450,000, and credit expenses for $50,000.
D) Debit equipment for $450,000, debit expenses for $50,000, credit cash for $250,000, and credit notes

Question

Quizplus · Accepted Answer

The best way to record this transaction would be to debit the equipment for the full cost of $500,000, and credit cash for $250,000 and notes payable for $250,000, since half the cost was paid in cash and the other half was financed. There is no need to record installation costs separately, as they are part of the overall cost of the equipment. Therefore, Option B is the correct choice.

The Gulp Convenience Store Chain Buys New Soda Machines for $450,000