The Correct Entry to Record the Purchase of a Motor

question 7

Multiple Choice

The correct entry to record the purchase of a motor vehicle for $25 000 cash, plus 10% GST is which of the following?

• A) Debit motor vehicles $27 500; credit bank $27 500
• B) Debit motor vehicles $25 000; debit GST outlays $2500; credit bank $27 500
• C) Debit motor vehicles $27 500; credit bank $25 000; credit GST collected $2500
• D) Debit motor vehicles $22 500; debit GST outlays $2500; credit bank $25 000

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Definitions:

Bondholders

Individuals or institutions that hold the debt securities issued by corporations or governments, entitled to receive interest payments and the principal repayment.

Premium Amortization

The gradual reduction of the premium paid above the par value of a bond, allocated over the bond's life.

Bond Amortization Schedule

A schedule that outlines the periodic reduction of the discount on bonds payable or the premium on bonds payable, along with the interest expense over the life of the bond.

Interest Paid

The amount paid over a period for borrowing funds or the cost incurred for the use of borrowed money.