Which of the following is the correct journal entry to record the purchase of equipment for \$10,000 in cash on December 31?

• A. Debit Equipment \$10,000; Credit Accounts Payable \$10,000
• B. Debit Equipment \$10,000; Credit Cash \$10,000
• C. Debit Supplies \$10,000; Credit Cash \$10,000
• D. Debit Cash \$10,000; Credit Equipment \$10,000

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the nature of the transaction. The purchase of equipment for \$10,000 in cash means that the company is acquiring a long-term asset (equipment) and paying for it immediately using cash.
2. Step 2: Identify the accounts involved. The accounts affected are 'Equipment' (an asset account) and 'Cash' (another asset account). Equipment increases, while Cash decreases.
3. Step 3: Determine the type of entry for each account. Since Equipment is increasing, it will be debited. Cash is decreasing, so it will be credited.
4. Step 4: Write the journal entry. The format for a journal entry is: Debit the account that increases and Credit the account that decreases. In this case, Debit Equipment \$10,000 and Credit Cash \$10,000.
5. Step 5: Verify the entry. Ensure that the debit and credit amounts are equal (\$10,000 each) and that the accounts used correctly reflect the transaction (Equipment for the asset acquired and Cash for the payment made).