The Gulp Convenience Store Chain Buys New Soda Machines for $450,000

question 106

Multiple Choice

The Gulp convenience store chain buys new soda machines for $450,000 and pays $50,000 for installation costs.One-half of the total cost or $250,000 is paid in cash; a note in the amount of $250,000 is signed.How should the company record this transaction?

• A) Debit Cash for $250,000, debit Notes Payable for $250,000, and credit Equipment for $500,000
• B) Debit Equipment for $500,000, credit Cash for $250,000, and credit Notes Payable for $250,000
• C) Debit cash for $250,000, debit Notes Payable for $250,000, credit Equipment for $450,000, and credit Operating Expenses for $50,000
• D) Debit Equipment for $450,000, debit Operating Expenses for $50,000, credit cash for $250,000, and credit Notes Payable for $250,000

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Definitions:

Maximize Utility

An economic principle where individuals or firms attempt to obtain the highest possible satisfaction or benefit from their resources and choices.

Decision Making

The cognitive process of selecting a course of action from multiple alternatives.

Economist

A professional who studies, teaches, or practices economics, the science concerned with the production, distribution, and consumption of goods and services.

Stroop Effect

A phenomenon demonstrating the cognitive interference where the brain's reaction time slows down when it needs to deal with conflicting information.