Which journal entry could represent a cash sale of equipment?

Which journal entry could represent a cash sale of equipment?

• A. Selling $70 worth of equipment for cash.
• B. Purchasing $70 worth of equipment with cash.
• C. Purchasing $70 worth of equipment on credit.
• D. Selling $70 worth of equipment on credit.

Answer: (A)

A cash sale of equipment increases cash and decreases the equipment asset in the books. The appropriate journal entry records a debit to Cash for the sale amount and a credit to Equipment for the same amount, here 70. This shows the business receiving cash and removing the asset from its records. The other scenarios involve paying cash to acquire equipment or selling on credit, which do not reflect an immediate cash inflow. If the sale price differed from the equipment’s book value, you’d also record a gain or loss, but with the information given, the straightforward cash sale is cash up and equipment down for the same amount.

A cash sale of equipment increases cash and decreases the equipment asset in the books. The appropriate journal entry records a debit to Cash for the sale amount and a credit to Equipment for the same amount, here 70. This shows the business receiving cash and removing the asset from its records. The other scenarios involve paying cash to acquire equipment or selling on credit, which do not reflect an immediate cash inflow. If the sale price differed from the equipment’s book value, you’d also record a gain or loss, but with the information given, the straightforward cash sale is cash up and equipment down for the same amount.