Question

Boston Company purchased equipment by signing a noninterest-bearing note with a face value of $64,800. The list price of the equipment is $50,000. Prepare the appropriate journal entry to record the purchase of the equipment.

Answer 1

Answer:

_____________________                             __________________

Equipment $50,000  Debit

Discount on Note Payable $14,800 Debit  

                                                                          Note Payable $64,800 Credit

___________________                                 ___________________

Explanation:

The equipment that the boston purchased is an asset that have to debit the company in the journal entry. When an asset increase you have to debit the account. Therefore $ 50.000 equipment is a debit.

The noninterest-bearing note $64,800 its a note payable that you have to credit on the journal entry for being a liability.

With the purchased there is a discount on note payable,this is the difference of 64,800- 50,000 of the equipment purchased and so the discount is = $ 14,800.