Select the journal entry to record the purchase.

Question

BlackTom AI · Accepted Answer

Question restated: Select the journal entry to record the purchase.
Options presented:
1) Dr. Cash 255,000; Cr. Machine 255,000
2) Dr. Machine 255,000; Cr. Cash 255,000
3) Dr. Machine 255,000; Dr. Depreciation Expense 13,500; Cr. Cash 268,500
4) None of the above.

Analysis of each option:
Option 1: Dr. Cash 255,000; Cr. Machine 255,000. This entry increases cash and decreases the machine asset, which does not reflect a purchase of a machine. In a purchase scenario, cash should decrease (credit) and machine asset should increase (debit). Therefore, this option misstates the effect on assets and is incorrect.

Option 2: Dr. Machine 255,000; Cr. Cash 255,000. This entry debits the Machine asset to record the purchase cost and credits Cash to reflect payment, which properly shows an acquisition funded by cash. The accounts and amounts align with typical journal entry conventions for asset purchases.

Option 3: Dr. Machine 255,000; Dr. Depreciation Expense 13,500; Cr. Cash 268,500. This entry combines an acquisition with depreciation expense and an overall cash outlay of 268,500, which is inconsistent with a straightforward purchase entry for 255,000. Depreciation is recognized over time, not at the point of purchase, and the cash effect would not be 268,500 unless additional transactions (e.g., freight, taxes) were included, which are not shown here. Thus this option is incorrect as a basic purchase entry.

Option 4: None of the above. Given that Option 2 correctly records the purchase, this statement is incorrect. However, if none of the other entries were appropriate, this would be the choice, but since Option 2 is correct, Option 4 does not apply.

Overall, the reasoning shows that the proper journal entry to record a purchase of an asset for cash is to debit the asset account (Machine) and credit Cash for the same amount, which corresponds to Option 2.

Select the journal entry to record the purchase.

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