Mon-Royal Co. purchased equipment on January 1, 2017 for $3,000,000 and paid cash for $2,000,000 and issued a 2-year note payable for the rest. Mon-Royal Co. also paid $20,000 cash for shipping and installation of the equipment. Other information Estimated useful life of the equipment at the time of purchase, 10 years. Estimated salvage (residual) value at the time of purchase, $320,000. The company uses the straight-line method of depreciation. The companys fiscal year coincides with the calendar year. On January 1, 2019 the equipment needed a major repair. The company paid $400,000 to repair the equipment. Based on an expert opinion, the repair will increase the useful life of the equipment for two years, however the residual value remains the same. On July 1, 2020 the company sold the equipment for $2,400,000 cash.

The journal entry prepared by Mon-Royal Co. to record the acquisition of equipment on January 1, 2017 is

a. Dr. Equipment $3,000,000, installation expense $20,000; Cr. Cash $2,020,000, Cr. Note payable $1,000,000.

b. Dr. Stock $3,020,000; Cr. Cash $2,020,000, Cr. Note payable $1,000,000.

c. Dr. Equipment $3,000,000; Cr. Cash $2,000,000, Cr. Note payable $1,000,000.

d. Dr. Equipment $3,020,000; Cr. Cash $2,020,000, Cr. Note payable $1,000,000.