The General Journal Entry to Record the Purchase of an Asset

question 134

Multiple Choice

The general journal entry to record the purchase of an asset on account would include

• A) a debit to Accounts Receivable and a credit to Fees Earned.
• B) a debit to Equipment and a credit to Accounts Payable.
• C) a debit to Accounts Payable and a credit to Equipment.
• D) a debit to Supplies and a credit to Cash.

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Definitions:

Inventory Cost

Inventory cost includes all expenses associated with acquiring, holding, and processing goods that are to be sold, including the costs of materials, labor, and overhead.

Customer Demand

The desire and willingness of consumers to purchase goods and services at given prices.

Inventory Turnover

A ratio that measures how often a company sells and replaces its stock of goods within a certain period, indicating efficiency in inventory management.

Average Inventory

The average value of a company's inventory over a specific period, calculated by adding the beginning and ending inventory and dividing by two.