Lou purchased his truck for $32,000. He paid $2,000 cash and took out a $30,000 loan. Select the correct journal entry.

Lou purchased his truck for $32,000. He paid $2,000 cash and took out a $30,000 loan. Select the correct journal entry.

• A. Debit Plant, Property, & Equipment 32,000; Credit Cash 2,000; Credit Loans Payable 30,000
• B. Debit Cash 2,000; Debit Loans Payable 30,000; Credit PP&E 32,000
• C. Debit PP&E 32,000; Credit Cash 2,000; Credit Loans Payable 30,000
• D. Debit PP&E 32,000; Debit Cash 2,000; Credit Loans Payable 30,000

Answer: (C)

Recording the purchase of a fixed asset with a mix of cash and financing involves recognizing the asset at its total cost and then showing how it was paid and financed. The truck is a long‑term asset, so you debit the asset account for the full price, 32,000. Since cash was reduced by 2,000, you credit Cash for that amount. The remaining 30,000 was financed with a loan, so you credit Loans Payable to record the liability. This entry—debit PP&E 32,000; credit Cash 2,000; credit Loans Payable 30,000—shows the asset increasing by 32,000, cash decreasing by 2,000, and a new liability of 30,000. The totals balance (32,000 in both the debits and credits), reflecting proper double-entry bookkeeping. Other possible formats would either misstate the change in cash or in the asset/liability amounts (for example, debiting Cash would imply cash increased, or crediting PP&E would reduce the asset).

Recording the purchase of a fixed asset with a mix of cash and financing involves recognizing the asset at its total cost and then showing how it was paid and financed. The truck is a long‑term asset, so you debit the asset account for the full price, 32,000. Since cash was reduced by 2,000, you credit Cash for that amount. The remaining 30,000 was financed with a loan, so you credit Loans Payable to record the liability.

This entry—debit PP&E 32,000; credit Cash 2,000; credit Loans Payable 30,000—shows the asset increasing by 32,000, cash decreasing by 2,000, and a new liability of 30,000. The totals balance (32,000 in both the debits and credits), reflecting proper double-entry bookkeeping.

Other possible formats would either misstate the change in cash or in the asset/liability amounts (for example, debiting Cash would imply cash increased, or crediting PP&E would reduce the asset).