On July 1, Gilbert County bought computer equipment for use in the administrative offices of the County. The equipment has an estimated useful life of three years and salvage of $10,000. Gilbert County has a 6/30 fiscal year-end. Assuming that the County maintains its books and records in a manner that facilitates the preparation of fund financial statements, the $85,000 cost of this equipment would require which of the following entries? a. Debit Expenditures $85,000; Credit Cash $85,000. b. Debit Equipment $85,000; Credit Cash $85,000. c. Debit Expenses $85,000; Credit Cash $85,000. d. No entry in the City's governmental funds

Question

Business

Monica Ruiz

24 May, 08:53

On July 1, Gilbert County bought computer equipment for use in the administrative offices of the County. The equipment has an estimated useful life of three years and salvage of $10,000. Gilbert County has a 6/30 fiscal year-end. Assuming that the County maintains its books and records in a manner that facilitates the preparation of fund financial statements, the $85,000 cost of this equipment would require which of the following entries? a. Debit Expenditures $85,000; Credit Cash $85,000. b. Debit Equipment $85,000; Credit Cash $85,000. c. Debit Expenses $85,000; Credit Cash $85,000. d. No entry in the City's governmental funds

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Answers (1)

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Willow Beard · Answer 1

b. Debit Equipment $85,000; Credit Cash $85,000.

Explanation:

Provided information,

Financial year will end on 30 June each year.

The computer equipment is purchased on 1 July

Cost of equipment = $85,000

Note: At the time of purchase as the equipment is long term, it will be accounted as fixed asset and is a capital expenditure, not a revenue expense to be charged in books of account.

Therefore, entry for recording the purchase of computer equipment shall be:

Equipment A/c Dr. $85,000

To Cash A/c $85,000

(Recording purchase of equipment in exchange of cash)