Question

In: Accounting

Grayton Industries purchased supplies for $1,200. They agreed to pay the balance of $700 in 30...

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.

Solutions

Expert Solution

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


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