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.

Answer 1

The correct answer is A.

Explanation :

It is assumed that $500 is paid in cash and remain $700 paid in 30 days

Merchandise supplies ............... Dr. $1,200

Cash .............................................. Cr. $500

Accounts payable ........................ Cr. $700.

(To record purchase of supplies)