Purchase of noncurrent assets



Q40. Purchase of noncurrent assets
Entity A purchased a building at $860,000 with a long-term bank loan of $860,000.
Prepare a journal entry to record this transaction.

A40. Increases in noncurrent assets are recorded on the debit side.

  Debit Credit
Building 860,000  
     Long-term borrowings   860,000

[Note]
1. Increase in noncurrent assets (asset): debit
2. Increase in long-term borrowings (liability): credit

[Exercise]
Entity B purchased equipment at $74,000 and issued a promissory note with the face amount of $74,000.

  Debit Credit
Equipment 74,000  
     Notes payable   74,000

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

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