Question

Grayton Industries purchased supplies for $1,200. They agreed to pay the balance of $700 in 30 days. The journal entry to record this transaction would include a debit to an asset account for $1,200, a credit to a liability account for $700. Which of the following would be the correct way to complete the recording of the transaction?

a.   Credit an asset account for $500.

b.   Credit the Grayton, Capital account for $500.

c.   Debit the Grayton, Capital account for $500.

d.   Credit another liability account for $500.

In the first month of operations for Pocket Industries, the total of the debit entries to the cash account amounted to $9,000 ($5,000 investment by the owner and revenues of $4,000). The total of the credit entries to the cash account amounted to $4,000 (purchase of equipment $2,000 and payment of accoubts payable $2,000). At the end of the month, the cash account has a(n)

a.   $2,000 credit balance.

b.   $4,000 debit balance.

c.   $2,000 credit balance.

d.   $4,000 debit balance.

Answer 1

1) Correct entry

Date	account and explanation	Debit	Credit
	Supplies	1200
	Account payable		700
	Cash		500

So answer is a) Credit an asset account for $500.

2) Cash account

Total Debit	9000
Total Credit	-4000
Balance	5000 Debit

So answer is 5000 Debit balance