Q21. Purchase of equipment
Entity A purchased equipment and issued a promissory note to pay $26,000 three months later.
Prepare a journal entry to record this transaction.

A21. Increase in equipment is recorded on the debit side.

  Debit Credit
Equipment 26,000  
     Notes payable   26,000

1. Increase in equipment (asset): debit
2. Increase in notes payable (liability): credit

Entity B purchased a building with a 10 year bank loan of $920,000.

  Debit Credit
Building 920,000  
     Long-term borrowings   920,000

1. Increase in building (asset): debit
2. Increase in long-term borrowings (liability): credit

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