Which of the following transactions would normally be recorded as an asset when cash is paid?

• A. Paying a utility bill for the current month
• B. Paying monthly rent in advance
• C. Purchasing office equipment for cash
• D. Paying salaries to employees

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of an asset. An asset is a resource owned by a company that provides future economic benefits. Examples include cash, equipment, prepaid expenses, and accounts receivable.
2. Step 2: Analyze each transaction to determine whether it meets the definition of an asset. Paying a utility bill for the current month is an expense because it does not provide future economic benefits—it is consumed immediately.
3. Step 3: Evaluate the transaction of paying monthly rent in advance. This qualifies as a prepaid expense, which is considered an asset because it represents a future economic benefit (the right to use the rented space in the future).
4. Step 4: Examine the transaction of purchasing office equipment for cash. Office equipment is a tangible asset that provides future economic benefits, so this transaction would be recorded as an asset.
5. Step 5: Assess the transaction of paying salaries to employees. Salaries are an expense because they are consumed immediately and do not provide future economic benefits, so this would not be recorded as an asset.