Equipment costing $20000 is purchased by paying $5000 cash and signing a note payable for the remainder. The journal entry should include a credit to Equipment. debit to Cash. credit to Notes Receivable. credit to Notes Payable.

The journal entry should include d. credit to notes payable

Explanation:

As the equipment is purchased and it is an asset, the increase in asset is recorded as a debit to the respective account. Thus, Equipment will be debited. So, the option a. credit to Equipment is incorrect.

The equipment is purchased and it is partially paid for using cash which is an asset and it decreased due to this payment, the decrease in asset is recorded as a credit to the respective account. Thus, Cash will be credited. So, the option b. debit to Cash is incorrect.

There is no involvement of Notes receivable in this transaction. Notes receivable is an asset and here we are using notes payable to cover for the remaining payment of the Equipment. Thus, the option c. credit to Notes Receivable is incorrect.

For the remaining payment of the equipment, a notes payable is signed which is a liability. As the increase in liability is credited, option d. credit to notes payable is the correct answer.