Talia59
Aug 6, 2012, 02:05 PM
Weldon Engineering owes one of its creditors $20,000. To settle the debt, Weldon pays
$5,000 cash and also issues common stock valued at $15,000 to the creditor.
How would this repayment of the $20,000 debt be recorded in Weldon's books?
A. Debit common stock $15,000; debit debt owed $5,000; credit cash $20,000
B. Debit debt owed $20,000; credit cash $5,000; credit common stock $15,000
C. Debit debt owed $5,000; credit cash $5,000
D. Debit common stock $15,000; debit cash $5,000; credit debit owed $20,000
**My answer: B because you I know that you first need to credit cash because it is a decrease in cash when you pay the creditor. Next you will need to credit common stock because you have issued common stock which is a credit on the t account. Then you must debit debt owed because that is an account payable so a debit in the account payable section would decrease what you owe. I'm not 100% here can someone please tell me if I'm correct?
$5,000 cash and also issues common stock valued at $15,000 to the creditor.
How would this repayment of the $20,000 debt be recorded in Weldon's books?
A. Debit common stock $15,000; debit debt owed $5,000; credit cash $20,000
B. Debit debt owed $20,000; credit cash $5,000; credit common stock $15,000
C. Debit debt owed $5,000; credit cash $5,000
D. Debit common stock $15,000; debit cash $5,000; credit debit owed $20,000
**My answer: B because you I know that you first need to credit cash because it is a decrease in cash when you pay the creditor. Next you will need to credit common stock because you have issued common stock which is a credit on the t account. Then you must debit debt owed because that is an account payable so a debit in the account payable section would decrease what you owe. I'm not 100% here can someone please tell me if I'm correct?