A Business Purchases Equipment by Paying $8,000 in Cash and Issuing

question 70

Multiple Choice

A business purchases equipment by paying $8,000 in cash and issuing a note payable of $12,000. Which of the following occurs?

• A)Cash is credited for $8,000; Equipment is credited for $20,000; and Notes Payable is debited for $12,000.
• B)Cash is credited for $8,000; Equipment is debited for $20,000; and Notes Payable is credited for $12,000.
• C)Cash is debited for $8,000; Equipment is debited for $12,000; and Notes Payable is credited for $20,000.
• D)Cash is debited for $8,000; Equipment is credited for $12,000; and Notes Payable is debited for $4,000.

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Definitions:

Plantwide Factory Overhead Rate

Plantwide Factory Overhead Rate is the single overhead rate calculated by dividing total factory overhead by the total base (such as direct labor hours or machine hours) used to allocate overhead costs to products.

Overhead Costs

Expenses related to running a business that cannot be linked directly to a specific product or service, such as rent, utilities, and management salaries.

Departments

Divisions within a company or organization that focus on specific tasks or responsibilities, such as marketing, finance, or human resources.

Products

Goods or services that are the result of a manufacturing or production process and are offered for sale by businesses.