Grayton Industries purchased supplies for $1,200. They paid $500 in cash and agr

Question

Grayton Industries purchased supplies for $1,200. They paid $500 in cash and agreed to pay the balance in 30 days. The journal entry to record this transaction would include a debit to an asset account for $1,200, a credit to a liability account for $700. Which of the following would be the correct way to complete the recording of the transaction?

a. Credit another liability account for $500.

b. Credit the Grayton, Capital account for $500.

c. Debit the Grayton, Capital account for $500.

d. Credit an asset account for $700.

Explanation / Answer

Journal entry:

Supplies [asset] [debit] $1200

To supplier [liability] [credit]      $700

To cash [asset] [credit]                  $500

Actually the correct answer is to be credit cash which is an asset account for $ 500

However no such option is provided

[Assuming cash was paid by grayton on his personnel capacity then it can be considered as an capital addition and thereby credit the grayton capital account by $ 500- option b]

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