Question

Journalize and explain...purchased office furniture from Hill Office Supply for $3,600 paying 10% cash with the remainder on account. Payments term 18 months, no interest. Depreciate over 36 months with no salvage value.

Answer 1

The journal entries will be
Account Title	Debit	Credit	Explanation
Office furniture	3600		Fixed asset a/c is debited & its balance increases
Cash (3600*10%)		360	Cash is credited & its balance decreases
Accounts payable(Bal.fig.)		3240	Liability is created & appears on the balance sheet , till fully paid
(to record purchase of office furniture , 10% cash & balance on a/c)
Depreciation expense	100		Allocation of the cost of the asset , to this income statement a/c
Accumulated depreciation -Office furniture		100	Contra-asset a/c which reduces the carrying value of the asset
(3600/36)
(To record monthly depreciation)
Accounts payable (3240/18)	180		Liability is debited on payment , to reduce the o/s balance
Cash		180	Cash is credited & hence reduces its balance
(to record monthly payment , of above account payable)

In addition to above
Account Title	Debit	Credit	Account category & rule for a/cg.
Office furniture	3600		Real a/c-- Debit what comes in
Cash (3600*10%)		360	Real a/c--Credit what goes out
Accounts payable(Bal.fig.)		3240	Personal a/c--- credit the giver
(to record purchase of office furniture , 10% cash & balance on a/c)
Depreciation expense	100		Nominal a/c---Debit all expenses
Accumulated depreciation -Office furniture		100	Contra-asset a/c-- to reduce asset corresponding to the above debit
(3600/36)
(To record monthly depreciation)
Accounts payable (3240/18)	180		Personal a/c--- debit the receiver
Cash		180	Real a/c--Credit what goes out
(to record monthly payment , of above account payable)