The cost of the soft-serve machine was $4,500. With $1,000 down and $3,500 financed on a lease. Which entry increases PP&E by the full asset cost?

The cost of the soft-serve machine was $4,500. With $1,000 down and $3,500 financed on a lease. Which entry increases PP&E by the full asset cost?

• A. Debit PP&E $3,500
• B. Credit Lease Payable $3,500
• C. Debit PP&E $4,500
• D. Credit PP&E $4,500

Answer: (C)

When you acquire a fixed asset, you record its full cost in PP&E regardless of how you pay. The machine costs 4,500, with 1,000 paid in cash and 3,500 financed via a lease. The asset should be recognized at the total cost, so you debit PP&E for 4,500. The down payment reduces cash, and the remaining 3,500 becomes a lease liability, but they are separate credits. Therefore, the entry that increases PP&E by the full asset cost is a debit to PP&E for 4,500.

When you acquire a fixed asset, you record its full cost in PP&E regardless of how you pay. The machine costs 4,500, with 1,000 paid in cash and 3,500 financed via a lease. The asset should be recognized at the total cost, so you debit PP&E for 4,500. The down payment reduces cash, and the remaining 3,500 becomes a lease liability, but they are separate credits. Therefore, the entry that increases PP&E by the full asset cost is a debit to PP&E for 4,500.