Multiple Choice
On July 1st, a company receives an invoice for $800 for office supplies purchased on account. Which of the following is the correct journal entry to record this transaction?
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2. Transaction Analysis
Journal Entries: Debits and Credits
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The expenditure incurred for changing the oil in the company's fleet of trucks is debited to which account?
A
Maintenance Expense
B
Accounts Payable
C
Equipment
D
Prepaid Insurance
Verified step by step guidance1
Understand the nature of the expenditure: Changing the oil in the company's fleet of trucks is a routine maintenance activity, not a capital expenditure or an insurance-related cost.
Identify the correct account type: Routine maintenance costs are typically recorded as expenses because they do not enhance the value or extend the life of the asset significantly.
Determine the appropriate account: Maintenance Expense is the account used to record costs associated with maintaining assets, such as vehicles, in their current condition.
Exclude other options: Accounts Payable is a liability account used to record amounts owed to suppliers, Equipment is an asset account used for capital purchases, and Prepaid Insurance is an asset account for insurance paid in advance.
Conclude that the expenditure should be debited to the Maintenance Expense account, as it aligns with the nature of the cost incurred.
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